- Preference foundations for nonexpected utility: a generalized and simplified technique
- Mathematics of operations research
- Pages (from-to)
- Document type
- Faculty of Economics and Business (FEB)
- Amsterdam School of Economics Research Institute (ASE-RI)
This paper examines a tradeoff-consistency technique for testing and axiomatically founding decision models. The technique improves earlier tradeoff-consistency techniques by only considering indifferences, not strict preferences. The technical axioms used are mostly algebraic and not, as is more common, topological. The resulting foundations are, at a time, more general and more accessible than earlier results, regarding both the technical and the intuitive axioms. The technique is applied to three popular theories of individual decision under uncertainty and risk, i.e.\ expected utility, Choquet expected utility, and prospect theory. The conditions used are better suited for empirical measurements of utility than earlier conditions, and accordingly are easier to test.