Living without state-independence of utilities

Brian Hill ()

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Abstract: This article is concerned with the representation of preferences which do not satisfy the ordinary axioms for state-independent utilities. After suggesting reasons for not being satisfied with solutions involving state-dependent utilities, an alternative representation shall be proposed involving state-independent utilities and a situation-dependent factor. The latter captures the interdependencies between states and consequences. Two sets of axioms are proposed, each permitting the derivation of subjective probabilities, state-independent utilities, and a situation-dependent factor, and each operating in a different framework. The first framework involves the concept of a decision situation—consisting of a set of states, a set of consequences and a preference relation on acts; the probabilities, utilities and situation-dependent factor are elicited by referring to other, appropriate decision situations. The second framework, which is technically related, operates in a fixed decision situation; particular "subsituations" are employed in the derivation of the representation. Possible interpretations of the situation-dependent factor and the notion of situation are discussed.

Keywords: Elicitation; Subjective probability; Subjective expected utility; State-dependent utility; Small worlds (search for similar items in EconPapers)
Date: 2009-10-01
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Published in Theory and Decision, 2009, Vol.67,n°4, pp.405-432. ⟨10.1007/s11238-008-9127-x⟩

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Related works:
Journal Article: Living without state-independence of utilities (2009)
Working Paper: Living without state-independence of utilities (2007)
Working Paper: Living without state-independence of utilities (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00463428

DOI: 10.1007/s11238-008-9127-x

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