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Action-Independent Subjective Expected Utility without States of the World
Binghamton University Economics Department, Binghamton, USA
- 1 Binghamton University Economics Department, Binghamton, USA
Theoretical Economics Letters·Volume 03 (2013)·Pages 17–21·Published 30 August 2013·DOI10.4236/tel.2013.35A2004
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Abstract
This paper develops an axiomatic theory of decision-making under uncertainty that has no state-space. The choice setting follows Karni [1,2]: a set of effects (outcomes), a set of actions which induce these effects, and a set of real-valued bets over effects. In Karni’s representation, a preference over action/bet pairs yields utility, which is action-dependent. In our representation, utility is action-independent. This is achieved by augmenting Karni’s choice set with lotteries over actions. Identification is achieved similarly to Anscombe-Aumann [3], in which there are objective “roulette” lotteries over subjective “horse race” lotteries.
KeywordsSubjective Expected UtilityStates of the WorldAction Independence
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