Journal article
Probabilistic choice and stochastic dominance
Economic Theory, Vol.50(1), pp.59-83
2012
Abstract
This paper presents an axiomatic model of probabilistic choice under risk. In this model, when it comes to choosing one lottery over another, each alternative has a chance of being selected, unless one lottery stochastically dominates the other. An individual behaves as if he or she compares lotteries to a reference lottery-the least upper bound or the greatest lower bound in terms of stochastic dominance. The proposed model is compatible with several well-known violations of expected utility theory such as the common ratio effect and the violations of betweenness. Necessary and sufficient conditions for the proposed model are completeness, weak stochastic transitivity, continuity, common consequence independence, outcome monotonicity, and odds ratio independence.
Details
- Title
- Probabilistic choice and stochastic dominance
- Authors/Creators
- P.R. Blavatskyy (Author/Creator) - Universität Innsbruck
- Publication Details
- Economic Theory, Vol.50(1), pp.59-83
- Publisher
- Springer-Verlag
- Identifiers
- 991005543455407891
- Copyright
- © 2010 Springer-Verlag.
- Murdoch Affiliation
- Murdoch University
- Language
- English
- Resource Type
- Journal article
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- Citation topics
- 6 Social Sciences
- 6.122 Economic Theory
- 6.122.1287 Risk Preferences
- Web Of Science research areas
- Economics
- ESI research areas
- Economics & Business