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A Simple Behavioral Characterization of Subjective Expected Utility

Blavatskyy, P. (2013) A Simple Behavioral Characterization of Subjective Expected Utility. Operations Research, 61 (4). pp. 932-940.

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Subjective expected utility (Savage, 1954) is the most widely used model to represent preferences under uncertainty (when objective probabilities of events may not be known). This paper presents a new behavioral characterization (preference axiomatization) of subjective expected utility. It is shown that the tradeoff consistency condition of Wakker (1984; 1989) can be weakened to a simpler axiom, which is referred to as standard sequence invariance by Krantz et al. (1971, Section 6.11.2) and Wakker (1984). This result is derived both in the connected topology approach and the algebraic approach (when step-continuity is replaced with solvability and Archimedean axioms).

Publication Type: Journal Article
Publisher: INFORMS (Institute for Operations Research and Management Sciences)
Copyright: INFORMS
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