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Social Aggregation Without the Expected Utility Hypothesis

  • Charles Blackorby

    (University of Warwick)

  • David Donaldson

    (The University of British Columbia [Vancouver])

  • Philippe Mongin

    (CECO - Laboratoire d'econometrie de l'école polytechnique - CNRS - Polytechnique - X)

This paper investigates the possibilities for satisfaction of both the ex-ante and ex-post Pareto principles in a general model in which neither individual nor social preferences necessarily satisfy the Expected Utility Hypothesis. If probabilities are subjective and allowed to vary, three different impossibility results are presented. If probabilities are 'objective' (identical across individuals and the observer), necessary and sufficient conditions on individual and social value functions are found (Theorem 4). The resulting individual value functions are consistent not only with Subjective Expected Utility theory, but also with some versions of Prospect Theory, Subjectively Weighted Utility Theory, and Anticipated Utility Theory. Social Preferences are Weighted Generalized Utilitarian and, in the case in which individual preferences satisfy the Generalized Bernoulli Hypothesis, they are Weighted Utilitarian. The objective-probability results for social preferences cast a new light on Harsanyi's Social Aggregation Theorem, which assumes that both individual and social preferences satisfy the Expecte Utility Hypothesis.

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Paper provided by HAL in its series Working Papers with number hal-00242932.

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Date of creation: 2004
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Handle: RePEc:hal:wpaper:hal-00242932
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  1. Hammond, P.J. & , ., 1987. "Consequentialist foundations for expected utility," CORE Discussion Papers 1987016, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Itzhak Gilboa & Dov Samet & David Schmeidler, 2001. "Utilitarian Aggregation of Beliefs and Tastes," Game Theory and Information 0105001, EconWPA.
  3. Edi Karni & Zvi Safra, 2002. "Individual Sense of Justice: A Utility Representation," Econometrica, Econometric Society, vol. 70(1), pages 263-284, January.
  4. Mongin, P & d'Aspremont, C, 1996. "Utility Theory and Ethics," Papers 9632, Paris X - Nanterre, U.F.R. de Sc. Ec. Gest. Maths Infor..
  5. Blackorby, Charles & Donaldson, David & Weymark, John A., 1999. "Harsanyi's social aggregation theorem for state-contingent alternatives1," Journal of Mathematical Economics, Elsevier, vol. 32(3), pages 365-387, November.
  6. Epstein, Larry G & Segal, Uzi, 1992. "Quadratic Social Welfare Functions," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 691-712, August.
  7. Itzhak Gilboa & Elchanan Ben-Porath & David Schmeidler, 1997. "On the Measurement of Inequality under Uncertainty," Post-Print hal-00481334, HAL.
  8. Hammond, Peter J, 1981. "Ex-ante and Ex-post Welfare Optimality under Uncertainty," Economica, London School of Economics and Political Science, vol. 48(191), pages 235-50, August.
  9. John C. Harsanyi, 1955. "Cardinal Welfare, Individualistic Ethics, and Interpersonal Comparisons of Utility," Journal of Political Economy, University of Chicago Press, vol. 63, pages 309.
  10. Mongin Philippe, 1995. "Consistent Bayesian Aggregation," Journal of Economic Theory, Elsevier, vol. 66(2), pages 313-351, August.
  11. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
  12. W. M. Gorman, 1968. "The Structure of Utility Functions," Review of Economic Studies, Oxford University Press, vol. 35(4), pages 367-390.
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