SFB 303 Discussion Paper No. A - 365
Author: Machina, Mark J., and David Schmeidler
Title: A More Robust Definition of Subjective Probability
Abstract: The goal of choice-theoretic derivations of subjective probability is
to separate a decision maker's underlying beliefs (subjective probabilities
of events) from their preferences (attitudes toward risk). Classical
derivations have all relied upon some form of the Marshak-Samuelson
"Independence Axiom" or the Savage "Sure-Thing Principle", which imply that
preferences over lotteries conform to the expected utility hypothesis. This
paper presents a choice-theoretic derivation of subjective uncertainty,
which neither assumes nor implies that the decision maker's preferences over
lotteries necessarily conform to the expected utility hypothesis.
Keywords: Subjective probability, uncertainty, subjective uncertainty,
non-expected utility theory, expected utility theory, Leonard J. Savage
JEL-Classification-Number:
Creation-Date: March 1992
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