TY - JOUR
T1 - An axiomatic characterization of preferences under uncertainty
T2 - Weakening the independence axiom
AU - Dekel, Eddie
N1 - Funding Information:
* I would like to thank Adam Brandenburger, Jerry Green, Mark Machina, Andreu Mas-Colell, and Roger Myerson for many helpful discussions and comments. I am grateful to Chew Soo Hong for pointing out an error in an earlier version of this paper. Support from NSF Grant IST-8310118 is also gratefully acknowledged.
PY - 1986/12
Y1 - 1986/12
N2 - The independence axiom used to derive the expected utility representation of preferences over lotteries is replaced by requiring only convexity, in terms of probability mixtures, of indifference sets. Two axiomatic characterizations are proven, one for simple measures and the other continuous and for all probability measures. The representations are structurally similar to expected utility, and are unique up to a generalization of affine transformations. First-order stochastic dominance and risk aversion are discussed using a method which finds an expected utility approximation to these preferences without requiring differentiability of the preference functional.
AB - The independence axiom used to derive the expected utility representation of preferences over lotteries is replaced by requiring only convexity, in terms of probability mixtures, of indifference sets. Two axiomatic characterizations are proven, one for simple measures and the other continuous and for all probability measures. The representations are structurally similar to expected utility, and are unique up to a generalization of affine transformations. First-order stochastic dominance and risk aversion are discussed using a method which finds an expected utility approximation to these preferences without requiring differentiability of the preference functional.
UR - http://www.scopus.com/inward/record.url?scp=46149129172&partnerID=8YFLogxK
U2 - 10.1016/0022-0531(86)90076-1
DO - 10.1016/0022-0531(86)90076-1
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AN - SCOPUS:46149129172
SN - 0022-0531
VL - 40
SP - 304
EP - 318
JO - Journal of Economic Theory
JF - Journal of Economic Theory
IS - 2
ER -