Econometrica: Jul 1992, Volume 60, Issue 4

A More Robust Definition of Subjective Probability

https://doi.org/0012-9682(199207)60:4<745:AMRDOS>2.0.CO;2-A
p. 745-780

David Schmeidler, Mark J. Machina

The goal of choice-theoretic derivations of subjective probability is to separate a decision maker's underlying beliefs (subjective probabilities of events) from their preferences (attitudes toward risk). Classical derivations have all relied upon some form of the Marschak-Samuelson "Independence Axiom" or the Savage "Sure-Thing Principle," which imply that preferences over lotteries conform to the expected utility hypothesis. This paper presents a choice-theoretic derivation of subjective probability, in a Savage-type setting of purely subjective uncertainty, which neither assumes nor implies that the decision maker's preferences over lotteries necessarily conform to the expected utility hypothesis.

Log In To View Full Content

Back