"Expected Utility" Analysis without the Independence Axiom

Expected utility theory without the completeness axiom

Universidad de Montevideo and New York University Istituto di Metodi Quantitativi Università Bocconi Department of Economics New York University September, 2001 for a potentially incomplete preference relation over lotteries by means of a set of von Neumann-Morgenstern utility functions. It is shown that, when the prize space is a compact metric space, a preference relation admits such a multi-...

Stochastic Dominance Analysis Without the Independence Axiom

Preference Reversals Without the Independence Axiom

Mark J. Nachina1 GENERALIZED EXPECTED UTILITY ANALYSIS AND THE NATURE OF OBSERVED VIOLATIONS OF THE INDEPENDENCE AXIOM

First expressed by Allais in the early fifties, dissatisfaction with the expected utility model of individual risk taking behavior has mushroomed in recent years, as the number of papers in this volume, its predecessor (Allais & Hagen(l979», and elsewhere2 indicates. The nature of the current debate, i.e. whether to reject a theoretically elegant and heretofore tremendously useful descriptive m...

Subjective independence and concave expected utility

When a potential hedge between alternatives does not reduce the exposure to uncertainty, we say that the decision maker considers these alternatives structurally similar. We offer a novel approach and suggest that structural similarity is subjective and should be different across decision makers. Structural similarity can be recovered through a property of the individual’s preferences referred ...