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Subjective Expected Utility with State-Dependent but Action/Observation-Independent Preferences

Author

Listed:
  • Jacques H. Drèze

    (Center for Operations Research and Econometrics (CORE), Université catholique de Louvain, B-1348 Louvain La Neuve, Belgium)

Abstract

Under state-dependent preferences, probabilities and units of scale of state-dependent utilities are not separately identified. In standard models, only their products matter to decisions. Separate identification has been studied under implicit actions by Drèze or under explicit actions and observations by Karni. This paper complements both approaches and relates them when conditional preferences for final outcomes are independent of actions and observations. That special case permits drastic technical simplification while remaining open to some natural extensions.

Suggested Citation

  • Jacques H. Drèze, 2018. "Subjective Expected Utility with State-Dependent but Action/Observation-Independent Preferences," Risks, MDPI, vol. 6(2), pages 1-9, March.
    • Handle: RePEc:gam:jrisks:v:6:y:2018:i:2:p:30-:d:139002
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    References listed on IDEAS

    as
    1. Fujita,Masahisa & Thisse,Jacques-François, 2013. "Economics of Agglomeration," Cambridge Books, Cambridge University Press, number 9781107001411, January.
    2. Edi Karni, 2013. "Bayesian decision theory with action-dependent probabilities and risk attitudes," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 53(2), pages 335-356, June.
    3. Hindriks, Jean & Myles, Gareth D., 2013. "Intermediate Public Economics," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262018691, December.
    4. REZE, Jacques H. & RUSTICHINI, Aldo, 2004. "State-dependent utility and decision theory," LIDAM Reprints CORE 1714, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    5. Edi Karni, 2011. "A theory of Bayesian decision making with action-dependent subjective probabilities," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 48(1), pages 125-146, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    expected utility; state-dependent preferences; subjective probability;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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