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A Simple Tool for Qualitatively Testing, Quantitatively Measuring, and Normatively Justifying Savage's Subjective Expected Utility

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Abstract

This paper introduces a new preference condition that can be used to justify (or criticize) expected utility. The approach taken in this paper is an alternative to Savage's, and is accessible to readers without a mathematical background. It is based on a method for deriving “comparisons of tradeoffs” from ordinal preferences. Our condition simplifies previously-published tradeoff conditions, and at the same time provides more general and more powerful tools to specialists. The condition is more closely related to empirical methods for measuring utility than its predecessors. It provides a unifying tool for qualitatively testing, quantitatively measuring, and normatively justifying expected utility.

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Authors and Affiliations

  1. Department of Quantitative Economics, University of Maastricht, P.O. Box 616, Maastricht, 6200 MD, The Netherlands

    Veronika Köbberling & Peter P. Wakker

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  1. Veronika Köbberling
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  2. Peter P. Wakker
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Correspondence to Peter P. Wakker.

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Köbberling, V., Wakker, P.P. A Simple Tool for Qualitatively Testing, Quantitatively Measuring, and Normatively Justifying Savage's Subjective Expected Utility. Journal of Risk and Uncertainty 28, 135–145 (2004). https://doi.org/10.1023/B:RISK.0000016140.72468.f7

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  • DOI: https://doi.org/10.1023/B:RISK.0000016140.72468.f7

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