An exchangeability-based finite-state axiomatization of subjective probability

Soo Hong Chew, Jacob S. Sagi and Wenqian Wang ()
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Soo Hong Chew: Southwestern University of Finance and Economics
Jacob S. Sagi: University of North Carolina
Wenqian Wang: Southwestern University of Finance and Economics

Economic Theory, 2025, vol. 80, issue 3, No 2, 685-702

Abstract: Abstract We axiomatize subjective probabilities on finite domains without requiring richness in the outcome space or restrictions on risk preference through event exchangeability, defined in Chew and Sagi (Econometrica, 74:771–786, 2006), which was implicit in the prior literature (Savage in The Foundations of Statistics, Weily, NewYork, 1954; Machina and Schmeidler in Econometrica, 60:745–780, 1992; Grant in Econometrica, 63:159–189, 1995). We characterize the unique subjective probability representing the underlying exchangeability relation and apply this subjective probability to characterize finite-state probabilistic sophistication.

Keywords: Subjective probability; Finite state spaces; Exchangeability; Probabilistic sophistication (search for similar items in EconPapers)
JEL-codes: D81 D83 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s00199-025-01637-5

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