Economists often operate under an implicit assumption that the tastes of a decision maker are quite stable, while his beliefs change with the availability of new information. We show that for a general class of preferences, a separation of a key component of tastes, the utility function, from the other components of the representation is possible only if the decision maker’s preferences satisfy a mildbut not completely innocuous condition, called‘certainty independence’. We also outline the axiomatic characterization of the preferences that obtain such separation, which are a subset of the biseparable preferences.

Certainty independence and the separation of utility and beliefs

Maccheroni, Fabio;Marinacci, Massimo
2005

Abstract

Economists often operate under an implicit assumption that the tastes of a decision maker are quite stable, while his beliefs change with the availability of new information. We show that for a general class of preferences, a separation of a key component of tastes, the utility function, from the other components of the representation is possible only if the decision maker’s preferences satisfy a mildbut not completely innocuous condition, called‘certainty independence’. We also outline the axiomatic characterization of the preferences that obtain such separation, which are a subset of the biseparable preferences.
2004
Ghiardato, Paolo; Maccheroni, Fabio; Marinacci, Massimo
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11565/51228
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