Randomizing without randomness

Paolo Ghirardato and Daniele Pennesi ()
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Daniele Pennesi: University of Torino

Economic Theory, 2023, vol. 75, issue 4, No 3, 1009-1037

Abstract: Abstract We provide a methodology for eliciting utility midpoints from preferences, assuming that payoffs are consumption plans and that preferences satisfy a minimal form of additive separability. The methodology does not require any subjective or objective uncertainty. Thus, this construction of utility midpoints allows us to define mixtures of acts in a purely subjective fashion, without making any assumptions as to the decision maker’s reaction to the uncertainty that may be present. This approach makes it possible to provide a simple and fully subjective characterization of the second-order subjective expected utility model, allowing a clear distinction of such model from subjective expected utility.

Keywords: Subjective mixture space; Ambiguity; Second-order subjective expected utility (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s00199-022-01435-3

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