Axiomatization of a Preference for Most Probable Winner

Pavlo Blavatskyy ()

Theory and Decision, 2006, vol. 60, issue 1, 17-33

Abstract: In binary choice between discrete outcome lotteries, an individual may prefer lottery L 1 to lottery L 2 when the probability that L 1 delivers a better outcome than L 2 is higher than the probability that L 2 delivers a better outcome than L 1 . Such a preference can be rationalized by three standard axioms (solvability, convexity and symmetry) and one less standard axiom (a fanning-in). A preference for the most probable winner can be represented by a skew-symmetric bilinear utility function. Such a utility function has the structure of a regret theory when lottery outcomes are perceived as ordinal and the assumption of regret aversion is replaced with a preference for a win. The empirical evidence supporting the proposed system of axioms is discussed. Copyright Springer 2006

Keywords: expected utility theory; axiomatization; betweenness; fanning-in; skew-symmetric bilinear utility; regret theory; C91; D81 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (19)

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DOI: 10.1007/s11238-005-4753-z

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