Random expected utility

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Abstract

We develop and analyze a model of random choice and random expected utility. A decision problem is a finite set of lotteries that describe the feasible choices. A random choice rule associates with each decision problem a probability measure over choices. A random utility function is a probability measure over von Neumann-Morgenstern utility functions. We show that a random choice rule maximizes some random utility function if and only if it is mixture continuous, monotone (the probability that a lottery is chosen does not increase when other lotteries are added to the decision problem), extreme (lotteries that are not extreme points of the decision problem are chosen with probability 0), and linear (satisfies the independence axiom).

Original languageEnglish (US)
Pages (from-to)121-146
Number of pages26
JournalEconometrica
Volume74
Issue number1
DOIs
StatePublished - Jan 1 2006

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Keywords

  • Expected utility
  • Random choice
  • Random utility

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