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Maxmin Expected Utility with Non-Unique Prior

Listed author(s):
  • Itzhak Gilboa

    (Northwestern University [Evanston])

  • David Schmeidler

    (Tel Aviv University - Tel Aviv University, OSU - Ohio State University [Columbus])

Acts are functions from states of nature into finite-support distributions over a set of 'deterministic outcomes'. We characterize preference relations over acts which have a numerical representation by the functional J(f) = min > {∫ uo f dP / P∈C } where f is an act, u is a von Neumann-Morgenstern utility over outcomes, and C is a closed and convex set of finitely additive probability measures on the states of nature. In addition to the usual assumptions on the preference relation as transitivity, completeness, continuity and monotonicity, we assume uncertainty aversion and certainty-independence. The last condition is a new one and is a weakening of the classical independence axiom: It requires that an act f is preferred to an act g if and only if the mixture of f and any constant act h is preferred to the same mixture of g and h. If non-degeneracy of the preference relation is also assumed, the convex set of priors C is uniquely determined. Finally, a concept of independence in case of a non-unique prior is introduced.

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Paper provided by HAL in its series Post-Print with number hal-00753237.

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Date of creation: 1989
Publication status: Published in Journal of Mathematical Economics, Elsevier, 1989, vol. 18, issue 2, pp. 141-153. <10.1016/0304-4068(89)90018-9>
Handle: RePEc:hal:journl:hal-00753237
DOI: 10.1016/0304-4068(89)90018-9
Note: View the original document on HAL open archive server: https://hal-hec.archives-ouvertes.fr/hal-00753237
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

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