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Bayesian beliefs with stochastic monotonicity: An extension of Machina and Schmeidler

Grant, Simon; Polak, Ben


Machina and Schmeidler show that the probabilistic sophistication can be obtained in an Anscombe–Aumann setting without imposing expected utility by maintaining stochastic monotonicity and adding a new axiom loosely analogous to Savage's P4. This analogous axiom, however, is very strong. In this note, we obtain probabilistic sophistication using a weaker (and more natural) analog of Savage's P4. Stochastic monotonicity is sufficient to bridge the gap, where Anscombe and Aumman use independence...[Show more]

CollectionsANU Research Publications
Date published: 2006
Type: Journal article
Source: Journal of Economic Theory
DOI: 10.1016/j.jet.2005.03.006


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