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Expected Utility with Purely Subjective Non-Additive Probabilities

Author

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  • Itzhak Gilboa

    (TAU - Tel Aviv University)

Abstract

Acts are functions from the set of states of the world into the set of consequences. Savage proposed axioms regarding a binary relation on the set of acts which are necessary and sufficient for it to be representable by the functional ʃu(*)dP for some real-valued (utility) function u on the set of consequences and a (probability) measure P on the set of states of the world. The Ellsberg paradox leads us to reject one of Savage's main axioms - the Sure Thing Principle - and develop a more general theory, in which the probability measure need not be additive.

Suggested Citation

  • Itzhak Gilboa, 1987. "Expected Utility with Purely Subjective Non-Additive Probabilities," Post-Print hal-00756291, HAL.
  • Handle: RePEc:hal:journl:hal-00756291
    DOI: 10.1016/0304-4068(87)90022-X
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    References listed on IDEAS

    as
    1. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
    2. Daniel Ellsberg, 1961. "Risk, Ambiguity, and the Savage Axioms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 75(4), pages 643-669.
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