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The paradox of the Bayesian experts and state-dependent utility theory

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  • P. Mongin.

Abstract

When n individuals satisfy the axioms of subjective expected utility (SEU) theory and these individuals' probabilities or/and utilities are sufficiently diverse, it is impossible to aggregate the individuals' preferences into a (n + 1)-preference which is both Paretian and in agreement with SEU theory. The paper restates this paradox in the framework of Anscombe and Aumann's axiomatization of SEU and investigates the consequences of relaxing their state-independence assumption. The paradox disappears from the pure state-dependent framework but reappears in a different form in a sophisticated variant of state-dependent utility theory which achieves the uniqueness of subjective probabilities. The paper compares this novel impossibility result with the earlier one. It concludes by discussing the foundations of the Pareto principle in both the ex ante and ex post versions.
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Suggested Citation

  • P. Mongin., 1997. "The paradox of the Bayesian experts and state-dependent utility theory," THEMA Working Papers 97-15, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    • Handle: RePEc:ema:worpap:97-15
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    References listed on IDEAS

    as
    1. De Meyer, Bernard & Mongin, Philippe, 1995. "A note on affine aggregation," Economics Letters, Elsevier, vol. 47(2), pages 177-183, February.
    2. Mongin Philippe, 1995. "Consistent Bayesian Aggregation," Journal of Economic Theory, Elsevier, vol. 66(2), pages 313-351, August.
    3. John Broome, 1990. "Bolker-Jeffrey Expected Utility Theory and Axiomatic Utilitarianism," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(3), pages 477-502.
    4. Karni, Edi & Schmeidler, David, 1993. "On the Uniqueness of Subjective Probabilities," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 3(2), pages 267-277, April.
    5. Wakker, Peter, 1987. "Subjective probabilities for state dependent continuous utility," Mathematical Social Sciences, Elsevier, vol. 14(3), pages 289-298, December.
    6. Mark J. Schervish & Teddy Seidenfeld & Joseph B. Kadane, 1991. "Shared Preferences and State-Dependent Utilities," Management Science, INFORMS, vol. 37(12), pages 1575-1589, December.
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    11. repec:bla:econom:v:48:y:1981:i:191:p:235-50 is not listed on IDEAS
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    More about this item

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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