Premium
A Model of Procedural Decision Making in the Presence of Risk *
Author(s) -
Dubra Juan,
Ok Efe A.
Publication year - 2002
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/1468-2354.t01-1-00048
Subject(s) - stochastic dominance , axiom , core (optical fiber) , preference , axiom independence , mathematical economics , preference relation , set (abstract data type) , independence (probability theory) , expected utility hypothesis , relation (database) , mathematics , von neumann architecture , revealed preference , dominance (genetics) , preference theory , econometrics , computer science , statistics , pure mathematics , telecommunications , biochemistry , chemistry , geometry , database , programming language , gene
We introduce a procedural model of risky choice in which an individual is endowed with a core preference relation that may be highly incomplete. She can, however, derive further rankings of alternatives from her core preferences by means of a procedure based on the independence axiom. We find that the preferences that are generated from an initial set of rankings according to this procedure can be represented by means of a set of von Neumann–Morgenstern utility functions, thereby allowing for incompleteness of preference relations. The proposed theory also yields new characterizations of the stochastic dominance orderings.