Utilitarian Preferences With Multiple Priors

Shiri Alon and Gabi Gayer

Econometrica, 2016, vol. 84, 1181-1201

Abstract: This paper proposes a method for aggregating individual preferences in the context of uncertainty. Individuals are assumed to abide by Savage's model of Subjective Expected Utility, in which everyone has his/her own utility and subjective probability. Disagreement on probabilities among individuals gives rise to uncertainty at the societal level, and thus society may entertain a set of probabilities rather than only one. We assume that social preference admits a Maxmin Expected Utility representation. In this context, two Pareto‐type conditions are shown to be equivalent to social utility being a weighted average of individual utilities and the social set of priors containing only weighted averages of individual priors. Thus, society respects consensus among individuals' beliefs and does not add ambiguity beyond disagreement on beliefs. We also deal with the case in which society does not rule out any individual belief.

Date: 2016
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