A Unified Derivation of Classical Subjective Expected Utility Models through Cardinal Utility
Classical foundations of expected utility were provided by Ramsey, de Finetti, von Neumann and Morgenstern, Anscombe and Aumann, and others. These foundations describe preference conditions to capture the empirical content of expected utility. The assumed preference conditions, however, vary among the models and a unifying idea is not readily transparent. Providing such a unifying idea is the purpose of this paper. The mentioned derivations have in common that a cardinal utility index for outcomes, independent of the states and probabilities, can be derived. Characterizing that feature provides the unifying idea of the mentioned models.
|Keywords||cardinal utility, expected utility, the sure-thing principle, trade off consistency|
|Persistent URL||dx.doi.org/10.1016/S0304-4068(98)00045-7, hdl.handle.net/1765/23081|
Wakker, P.P., & Zank, H.. (1999). A Unified Derivation of Classical Subjective Expected Utility Models through Cardinal Utility. Journal of Mathematical Economics, 32(1), 1–19. doi:10.1016/S0304-4068(98)00045-7