 Mixture independence foundations for expected utilityJingyi Meng, Craig Webb and Horst Zank Journal of Mathematical Economics, 2024, vol. 111, issue C Abstract: An alternative preference foundation for expected utility is provided. Our segregated approach considers four logically independent implications of the classic von Neumann–Morgenstern independence axiom. The monotonicity principle is, for a transitive relation, equivalent to monotonicity with respect to first-order stochastic dominance. Rank-dependent separability is similar to the comonotonic sure-thing principle used in the ambiguity literature. The remaining two properties are weak formulations of the independence principle which invoke the latter only for probability mixtures with the extreme, that is the best, respectively, the worst outcome. These four implications of independence, together with completeness, transitivity and continuity of a preference relation, characterize expected utility. Furthermore, if rank-dependent separability is dropped, expected utility still holds on each subset of three-outcomes lotteries that give positive probability to both the best and the worst outcomes. Keywords: Expected utility; Mixture independence; Preference foundation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:111:y:2024:i:c:s0304406823001313 DOI: 10.1016/j.jmateco.2023.102938 Access Statistics for this article Journal of Mathematical Economics is currently edited by Atsushi (A.) Kajii More articles in Journal of Mathematical Economics from Elsevier |
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