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On the independence of irrelevant assets: McEntire’s conjecture. (English) Zbl 0727.90010

Summary: P. L. McEntire [Manage. Sci. 30, 952-963 (1984; Zbl 0551.90003)] conjectured that all concave utility functions satisfy his independence- from-irrelevant-assets (IIA) property. This paper shows that this conjecture is false. The paper provides several families of utility functions, all of whose members violate the IIA property; moreover, it is shown that the set of utility functions violating the IIA property is quite large, and that it is widespread throughout the entire space of utility functions.

MSC:

91B16 Utility theory

Citations:

Zbl 0551.90003
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