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Journal Articles Journal of Economic Theory Year : 2009

When is there state independence?

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Abstract

Whether a preference relation can be represented using state-independent utilities as opposed to state-dependent utilities may depend on which acts count as constant acts. This observation underlies an extension of Savage's expected utility theory to the state-dependent case that was proposed in this journal by Edi Karni. His result contains a condition requiring the existence of a set of acts which can play the role of constant acts and support a representation involving a state-independent utility function. This paper contains necessary and sufficient conditions on the preference relation for such a set of acts to exist. Results are obtained both for the Savage and the Anscombe and Aumann frameworks. Among the corollaries are representation theorems for state-dependent utilities. Relationships to Karni's work and extensions of the results are discussed.
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hal-00463429 , version 1 (12-03-2010)

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Brian Hill. When is there state independence?. Journal of Economic Theory, 2009, Vol.144,n°3, pp.1119-1134. ⟨10.1016/j.jet.2008.11.008⟩. ⟨hal-00463429⟩

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