Subjectively Expected State-Independent Utility on State-Dependent Consequence Domains
The standard decision theories of Savage (1954) and of Anscombe and Aumann (1963) both rely on the assumption that there are “constant acts” yielding the same consequence in all states of the world. More precisely, they postulate that the domain of consequences is state independent. But there are many decision problems where this hypothesis makes no sense — for instance, where there is a risk of death or serious injury. The point was first made by Drèze (1958, 1961) that such problems do not fit well with Savage’s (1954) assumption that all consequences are possible in every state of the world.
KeywordsSubjective Probability Expect Utility Theory Consequence Domain Universal Domain Contingent Preference
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