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The Problem of State-Dependent Utility: A Reappraisal

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  • Jean Baccelli

    (MCMP - Munich Center for Mathematical Philosophy)

Abstract

State-dependent utility is a problem for the behavioral branch of decision theory under uncertainty. It questions the very possibility that beliefs be revealed by choice data. According to the current literature, all models of beliefs are equally exposed to the problem. Moreover, the problem is solvable only when the decision-maker can influence the resolution of uncertainty. This paper gives grounds to reject these two views. The various models of beliefs can be shown to be unequally exposed to the problem of state-dependent utility. The problem can be argued to be solved even when the decision-maker has no influence over the resolution of uncertainty. The implications of such reappraisal for a philosophical appreciation of the revealed preference methodology are discussed.

Suggested Citation

  • Jean Baccelli, 2019. "The Problem of State-Dependent Utility: A Reappraisal," Post-Print hal-02172207, HAL.
    • Handle: RePEc:hal:journl:hal-02172207
    DOI: 10.1093/bjps/axz024
    Note: View the original document on HAL open archive server: https://hal.science/hal-02172207
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    References listed on IDEAS

    as
    1. Hill, Brian, 2009. "When is there state independence?," Journal of Economic Theory, Elsevier, vol. 144(3), pages 1119-1134, May.
    2. Chambers,Christopher P. & Echenique,Federico, 2016. "Revealed Preference Theory," Cambridge Books, Cambridge University Press, number 9781107087804, September.
    3. Arouri, Mohamed & Teulon, Frédéric & Rault, Christophe, 2013. "Equity risk premium and regional integration," International Review of Financial Analysis, Elsevier, vol. 28(C), pages 79-85.
    4. Simone Cerreia-Vioglio & Paolo Ghirardato & Fabio Maccheroni & Massimo Marinacci & Marciano Siniscalchi, 2011. "Rational preferences under ambiguity," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 48(2), pages 341-375, October.
    5. Edi Karni & David Schmeidler, 2016. "An expected utility theory for state-dependent preferences," Theory and Decision, Springer, vol. 81(4), pages 467-478, November.
    6. Tsogbadral Galaabaatar & Edi Karni, 2013. "Subjective Expected Utility With Incomplete Preferences," Econometrica, Econometric Society, vol. 81(1), pages 255-284, January.
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    Cited by:

    1. Dietrich, Franz, 2021. "Fully Bayesian aggregation," Journal of Economic Theory, Elsevier, vol. 194(C).
    2. Franz Dietrich, 2020. "The Rational Group," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-02431868, HAL.
    3. Karni, Edi, 2020. "On the indeterminacy of the representation of beliefs by probabilities," Economics Letters, Elsevier, vol. 196(C).

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