Subjective independence and concave expected utility

Ehud Lehrer and Roee Teper ()

Journal of Economic Theory, 2015, vol. 158, issue PA, 33-53

Abstract: When a potential hedge between alternatives does not reduce the exposure to uncertainty, we say that the decision maker considers these alternatives structurally similar. We offer a novel approach and suggest that structural similarity is subjective and should be different across decision makers. Structural similarity can be recovered through a property of the individual's preferences referred to as subjective codecomposable independence. This property characterizes a class of event-separable models and allows us to differentiate between perception of uncertainty and attitude towards it. In addition, our approach provides a behavioral foundation to Concave Expected Utility preferences.

Keywords: Subjective independence; Codecomposable independence; Concave expected utility; Choquet expected utility; Uncertainty aversion; Machina paradox (search for similar items in EconPapers)
JEL-codes: D81 D83 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:158:y:2015:i:pa:p:33-53

DOI: 10.1016/j.jet.2015.03.011

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