Probabilistic sophistication and stochastic monotonicity in the savage framework. (English) Zbl 1152.91415

Grant, Simon; Özsoy, Hatice; Polak, Ben

Math. Soc. Sci. 55, No. 3, 371-380 (2008).

Summary: M. J. Machina and D. Schmeidler [Econometrica 60, No. 4, 745-780 (1992; Zbl 0763.90012)] have shown that probabilistic sophistication can be obtained in a Savage setting without imposing expected utility by dropping Savage’s axiom P2 (sure-thing principle) and strengthening his axiom P4 (weak comparative probability). Their stronger axiom, however, embodies a degree of separability analogous to P2. In this note, we obtain probabilistic sophistication using Savage’s original axiom P4 and a weaker analog of Savage’s P2.

MSC:

91B08	Individual preferences
91B70	Stochastic models in economics

Keywords:

subjective probability; probabilistic sophistication; stochastic monotonicity; sure-thing principle; cumulative dominance

References:

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