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A Single-Stage Approach to Anscombe and Aumann's Expected Utility

Author

Listed:
  • Sarin, R.
  • Wakker, P.P.

    (Tilburg University, Center For Economic Research)

Abstract

Anscombe and Aumann showed that if one accepts the existence of a physical randomizing device such as a roulette wheel then Savage's derivation of subjective expected utility can be considerably simplified. They, however, invoked compound gambles to define their axioms. We demonstrate that the subjective expected utility derivation can be further simplified and need not invoke compound gambles. Our simplification is obtained by closely following the steps by which probabilities and utilities are elicited.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Sarin, R. & Wakker, P.P., 1996. "A Single-Stage Approach to Anscombe and Aumann's Expected Utility," Discussion Paper 1996-45, Tilburg University, Center for Economic Research.
  • Handle: RePEc:tiu:tiucen:aae9febd-70bd-4a52-9c6b-43e547f185b9
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    References listed on IDEAS

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    1. Machina Mark J. & Schmeidler David, 1995. "Bayes without Bernoulli: Simple Conditions for Probabilistically Sophisticated Choice," Journal of Economic Theory, Elsevier, vol. 67(1), pages 106-128, October.
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    3. R. Duncan Luce & Detlof von Winterfeldt, 1994. "What Common Ground Exists for Descriptive, Prescriptive, and Normative Utility Theories?," Management Science, INFORMS, pages 263-279.
    4. G. L. S. Shackle, 1949. "A Non-Additive Measure of Uncertainty," Review of Economic Studies, Oxford University Press, vol. 17(1), pages 70-74.
    5. Frederick Mosteller & Philip Nogee, 1951. "An Experimental Measurement of Utility," Journal of Political Economy, University of Chicago Press, vol. 59, pages 371-371.
    6. Eichberger, Jurgen & Kelsey, David, 1996. "Uncertainty Aversion and Dynamic Consistency," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(3), pages 625-640, August.
    7. Sarin, Rakesh K & Wakker, Peter, 1992. "A Simple Axiomatization of Nonadditive Expected Utility," Econometrica, Econometric Society, vol. 60(6), pages 1255-1272, November.
    8. Gilboa, Itzhak, 1987. "Expected utility with purely subjective non-additive probabilities," Journal of Mathematical Economics, Elsevier, vol. 16(1), pages 65-88, February.
    9. Schmeidler, David, 1989. "Subjective Probability and Expected Utility without Additivity," Econometrica, Econometric Society, vol. 57(3), pages 571-587, May.
    10. Peter H. Farquhar, 1984. "State of the Art---Utility Assessment Methods," Management Science, INFORMS, pages 1283-1300.
    11. Machina, Mark J & Schmeidler, David, 1992. "A More Robust Definition of Subjective Probability," Econometrica, Econometric Society, vol. 60(4), pages 745-780, July.
    12. Graham Loomes & Robert Sugden, 1986. "Disappointment and Dynamic Consistency in Choice under Uncertainty," Review of Economic Studies, Oxford University Press, vol. 53(2), pages 271-282.
    13. Karni, Edi, 1993. "A Definition of Subjective Probabilities with State-Dependent Preferences," Econometrica, Econometric Society, vol. 61(1), pages 187-198, January.
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    Citations

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    Cited by:

    1. Machina, Mark J, 2001. "Almost-Objective Uncertainty," University of California at San Diego, Economics Working Paper Series qt3ps1k85f, Department of Economics, UC San Diego.
    2. Francis C. Chu & Joseph Y. Halpern, 2004. "Great expectations. Part II: Generalized expected utility as a universal decision rule," Game Theory and Information 0411004, EconWPA.
    3. repec:spr:joecth:v:63:y:2017:i:4:d:10.1007_s00199-016-0972-5 is not listed on IDEAS
    4. repec:spr:joecth:v:64:y:2017:i:1:d:10.1007_s00199-016-1003-2 is not listed on IDEAS
    5. Yoram Halevy & Vincent Feltkamp, 2005. "A Bayesian Approach to Uncertainty Aversion," Review of Economic Studies, Oxford University Press, vol. 72(2), pages 449-466.
    6. Pierpaolo Battigalli & Simone Cerreia-Vioglio & Fabio Maccheroni & Massimo Marinacci, 2017. "Mixed extensions of decision problems under uncertainty," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), pages 827-866.

    More about this item

    Keywords

    expected utility theory; decision analysis; revealed preference;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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