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
Creation-Date: March 1992
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