Econometrica: Jul 1992, Volume 60, Issue 4
A More Robust Definition of Subjective Probability
David Schmeidler, Mark J. MachinaThe 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.
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