A More Robust Definition of Subjective Probability

Mark Machina () and David Schmeidler

Econometrica, 1992, vol. 60, issue 4, 745-80

Abstract: The goal of choice-theoretic derivations of subjective probability is to separate a decisionmaker's underlying beliefs (subjective probabilities of events) from their preferences (attitudes toward risk). Classical derivations have all relied upon some form of the Marschak-Samuelson "Independence Axiom" or the Savage "Sure-Thing Principle," which imply that preferences over lotteries conform to the expected utility hypothesis. This paper presents a choice-theoretic derivation of subjective probability in a Savage-type setting of purely subjective uncertainty, which neither assumes nor implies that the decisionmaker's preferences over lotteries necessarily conform to the expected utility hypothesis. Copyright 1992 by The Econometric Society.

Date: 1992
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