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Living without state-independence of utilities

Author

Listed:
  • Brian Hill

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper is concerned with the representation of preferences which do not satisfy the ordinary axioms for state-independent utilities. After suggesting reasons for not being satisfied with representations using state-dependent utilities, an alternative representation shall be proposed involving state-independent utilities and a reliability factor on acts. The latter represents the degree to which purported acts can actually succeed in yielding promised consequences given particular states. This factor captures the interdependencies between states and consequences. Two sets of axioms are proposed, each permitting the derivation of subjective probabilities, state-independent utilities, and a reliability factor, and each operating in a different framework. The first framework involves the concept of a decision situation - consisting of a set of states, a set of consequences and a preference relation on acts; the probability, utility and reliability functions are elicited by referring to other, appropriate decision situations. The second framework, which is technically related, operates in a fixed decision situation; particular "subsituations" are employed in the derivation of the representation.

Suggested Citation

  • Brian Hill, 2007. "Living without state-independence of utilities," Working Papers hal-00584514, HAL.
    • Handle: RePEc:hal:wpaper:hal-00584514
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    JEL classification:

    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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