CFDP 746
An Axiomatization of Utility and Subjective Probability Based on Objective Probability
Author(s):Publication Date: April 1985
Pages: 26
Abstract:
This paper provides an axiomatic model based on an extraneous random device generating objective probabilities for the derivation of expected utilities and subjective probabilities. Four basic axioms fully determine a real-valued utility function and a finitely additive subjective probability measure. The restrictions of these axioms to lotteries depending only upon events of the random device yield the von Neumann-Morgenstern axioms.
Keywords:
Real-world event, auxiliary event, Objective probabilities, Subjective probabilities, von Neumann-Morgenstern axioms
JEL Classification Codes: 026, 022