CFDP 1621

Probabilistic Sophistication and Stochastic Monotonicity in the Savage Framework

Author(s): 

Publication Date: August 2007

Pages: 15

Abstract: 

Machina and Schmeidler (1992) show that probabilistic sophistication can be obtained in a Savage setting without imposing expected utility by dropping Savage’s axiom P2 (sure-thing principle) and strengthening his axiom P4 (weak comparative probability). Their stronger axiom, however, embodies a degree of separability analogous to P2. In this note, we obtain probabilistic sophistication using Savage’s original axiom P4 and a weaker analog of Savage’s P2.

Keywords: 

Subjective probability; Probabilistic sophistication, Stochastic monotonicity, Sure-thing principle, Cumulative dominance

JEL Classification Codes:  D81

Note: 

Published in Mathematical Social Sciences (May 2008), 55(3): 371-380, [DOI]