The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

State-Dependent Preferences

  • Edi Karni
Reference work entry


State-dependent preferences pertains to situations involving decision making in the face of uncertainty, in which the states resolving the uncertainty are of direct concern to the decision maker, and affect his or her evaluation of the consequences. The presence of state-dependent preferences raises fundamental issues concerning the representation of the decision maker’s preference relations and, in particular, the definition and interpretation of subjective probabilities. These difficulties are explained and an approach to resolving them is discussed.


Decisions under uncertainty Expected utility hypothesis Moral hazard Risk aversion Savage, L, Savage’s subjective expected utility model State-dependent preferences Uncertainty 

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Edi Karni
    • 1
  1. 1.