Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/221445
Authors: 
Machina, Mark J.
Schmeidler, David
Year of Publication: 
1994
Series/Report no.: 
Discussion Paper No. 1088
Abstract: 
In 1963, Anscombe and Aumann demonstrated that the introduction of an objective randomizing device into the Savage setting of subjective uncertainty considerably simplified the derivation of subjective probability from a decision maker's preferences over uncertain bets. The purpose of this paper is to present a more general derivation of classical subjective probability in such a framework, which neither assumes nor implies that the individual's risk preferences necessarily conform to the expected utility principle. We argue that the essence of "Bayesian rationality" is the assignment, correct manipulation, and proper updating of subjective event probablities when evaluating and comparing uncertain prospects, regardless of whether attitudes toward risk satisfy the expected utility property.
Document Type: 
Working Paper

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