"Making Book Against Oneself," The Independence Axiom, and Nonlinear Utility Theory | Zendy

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"Making Book Against Oneself," The Independence Axiom, and Nonlinear Utility Theory

Author(s) -

Jerry Green

Publication year - 1987

Publication title -

the quarterly journal of economics

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 34.573

H-Index - 259

eISSN - 1531-4650

pISSN - 0033-5533

DOI - 10.2307/1884281

Subject(s) - axiom , mathematical economics , lottery , independence of irrelevant alternatives , axiom independence , independence (probability theory) , prima facie , convexity , economics , expected utility hypothesis , von neumann–morgenstern utility theorem , mathematics , econometrics , microeconomics , epistemology , social choice theory , philosophy , financial economics , statistics , geometry

An individual with known preferences over lotteries can be led to accept random wealth distributions different from his initial endowment by a sequential process in which some uncertainty is resolved and he is offered a new lottery in place of the remaining uncertainty. This paper examines the restrictions that can be placed on an individual's preferences by axioms that stipulate that such a process not be able to generate a new wealth distribution that is prima facie inferior to the original. The relationship of these axioms to the independence axiom of von Neumann and Morgenstern and to the quasi convexity of preferences in the wealth distribution are explored.

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