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Generalizations of SEU: a geometric tour of some non-standard models

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  • Matthew J. Ryan

Abstract

Subjective expected utility (SEU) theory is ubiquitous in models of economic environments involving uncertainty. Part of its appeal is its elegant axiomatization by Anscombe and Aumann, whose representation theorem uses little more than the simple geometry of expected utility. Nevertheless, the elegance of the SEU axioms comes at the cost of significant restrictiveness. Several generalizations of SEU have been developed to address its empirical and conceptual weaknesses. This paper offers a synthesis of these non-standard decision models. For each model, we sketch a proof of its representation theorem that adapts the geometry of Anscombe and Aumann. Copyright 2009 , Oxford University Press.

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  • Matthew J. Ryan, 2009. "Generalizations of SEU: a geometric tour of some non-standard models," Oxford Economic Papers, Oxford University Press, vol. 61(2), pages 327-354, April.
    • Handle: RePEc:oup:oxecpp:v:61:y:2009:i:2:p:327-354
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    Cited by:

    1. Han Bleichrodt & Christophe Courbage & Béatrice Rey, 2019. "The value of a statistical life under changes in ambiguity," Journal of Risk and Uncertainty, Springer, vol. 58(1), pages 1-15, February.
    2. Nina Anchugina, 2015. "A simple framework for the axiomatization of exponential and quasi-hyperbolic discounting," Papers 1511.06454, arXiv.org.
    3. Matthew Ryan, 2015. "Binary Choice Probabilities on Mixture Sets," Working Papers 2015-01, Auckland University of Technology, Department of Economics.
    4. James Foster & Mark McGillivray & Suman Seth, 2012. "Rank Robustness of Composite Indices: Dominance and Ambiguity," OPHI Working Papers 26b, Queen Elizabeth House, University of Oxford.
    5. Karni, Edi & Maccheroni, Fabio & Marinacci, Massimo, 2015. "Ambiguity and Nonexpected Utility," Handbook of Game Theory with Economic Applications,, Elsevier.
    6. Nina Anchugina, 2017. "A simple framework for the axiomatization of exponential and quasi-hyperbolic discounting," Theory and Decision, Springer, vol. 82(2), pages 185-210, February.
    7. Stefan Trautmann & Peter P. Wakker, 2018. "Making the Anscombe-Aumann approach to ambiguity suitable for descriptive applications," Journal of Risk and Uncertainty, Springer, vol. 56(1), pages 83-116, February.

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