 Stochastic utility theoremPavlo R. Blavatskyy Journal of Mathematical Economics, 2008, vol. 44, issue 11, 1049-1056 Abstract: This paper analyzes individual decision making. It is assumed that an individual does not have a preference relation on the set of lotteries. Instead, the primitive of choice is a choice probability that captures the likelihood of one lottery being chosen over the other. Choice probabilities have a stochastic utility representation if they can be written as a non-decreasing function of the difference in expected utilities of the lotteries. Choice probabilities admit a stochastic utility representation if and only if they are complete, strongly transitive, continuous, independent of common consequences and interchangeable. Axioms of stochastic utility are consistent with systematic violations of betweenness and a common ratio effect but not with a common consequence effect. Special cases of stochastic utility include the Fechner model of random errors, Luce choice model and a tremble model of [Harless, D., Camerer, C., 1994. The predictive utility of generalized expected utility theories. Econometrica 62, 1251-1289]. Keywords: Expected; utility; theory; Stochastic; utility; Fechner; model; Luce; choice; model; Tremble (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:44:y:2008:i:11:p:1049-1056 Access Statistics for this article Journal of Mathematical Economics is currently edited by Atsushi (A.) Kajii More articles in Journal of Mathematical Economics from Elsevier |
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