Expected Utility with Purely Subjective Non-Additive Probabilities

Itzhak Gilboa (1)

1 TAU - Tel Aviv University

Acts are functions from the set of states of the world into the set of consequences. Savage proposed axioms regarding a binary relation on the set of acts which are necessary and sufficient for it to be representable by the functional ʃu(*)dP for some real-valued (utility) function u on the set of consequences and a (probability) measure P on the set of states of the world. The Ellsberg paradox leads us to reject one of Savage's main axioms - the Sure Thing Principle - and develop a more general theory, in which the probability measure need not be additive.

Keywords: Expected Utility; Subjective; Non-Additive Probabilities

Domains: Humanities and Social Sciences; Economics and Finance; Economy and decision science

Itzhak Gilboa. Expected Utility with Purely Subjective Non-Additive Probabilities. Journal of Mathematical Economics, 1987, vol. 16, pp. 65-88. ⟨10.1016/0304-4068(87)90022-X⟩. ⟨hal-00756291⟩