Preferences under Certainty and Uncertainty: A Note

Abstract

A recent article by Blackorby et al. (1977) attempts to provide a set of sufficient conditions for the expected utility hypothesis. In their derivation they manage to take the sting out of the most objectionable aspect of the original von Neuman-Morgenstern assumptions-the continuity postulate over lottery bundles. They suggest that this postulate requires only the recognition of the fact that any irrational real number can be approximated arbitrarily closely by rational numbers. However, the proof of the expected utility hypothesis offered by these authors is incorrect. Suppose there are S states of nature and n commodities. A commodity bundle in state s can be represented by Xs = (Xs, ..., Xs) and all contingent commodities by X = (X1, ..., Xs). Treating X as an nS dimensional commodity bundle with additivity over states and equal subjective probabilities, Blackorby et al. show that

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 0 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.