Geodesic
Expected utility for probabilistic prospects and the common ratio property
Yugoslav journal of operations research, Tome 33 (2023) no. 4, p. 531 .

Voir la notice de l'article provenant de la source eLibrary of Mathematical Institute of the Serbian Academy of Sciences and Arts

We prove the existence of an expected utility function for preferences over probabilistic prospects satisfying Strict Monotonicity, Indifference, the Common Ratio Property, Substitution and Reducibility of Extreme Prospects. The example in [1] that is inconsistent with the existence of a von Neumann-Morgenstern for preferences over probabilistic prospects, violates the Common Ratio Property. Subsequently, we prove the existence of expected utility functions with piecewise linear Bernoulli utility functions for preferences that are piece-wise linear. For this case a weaker version of the Indifference Assumption that is used in the earlier existence theorems is sufficient. We also state analogous results for probabilistic lotteries. We do not require any compound prospects or mixture spaces to prove any of our results. In the third last section of this paper, we " argue " that the observations related to Allais paradox, do not constitute a violation of expected utility maximization by individuals, but is a likely manifestation of individuals assigning (experiment or menu-dependent?) subjective probabilities to events which disagree with their objective probabilities.
Classification : 91A30, 91B06, 91B08
Keywords: Probabilistic prospects, preferences, expected utility, common ratio property, piece-wise linear, Allais' paradox, subjective probability, uncertainty aversion 
@article{YJOR_2023_33_4_a1,
     author = {Somdeb Lahiri},
     title = {Expected utility for probabilistic prospects and the common ratio property},
     journal = {Yugoslav journal of operations research},
     pages = {531 },
     publisher = {mathdoc},
     volume = {33},
     number = {4},
     year = {2023},
     language = {en},
     url = {http://geodesic.mathdoc.fr/item/YJOR_2023_33_4_a1/}
}
TY  - JOUR
AU  - Somdeb Lahiri
TI  - Expected utility for probabilistic prospects and the common ratio property
JO  - Yugoslav journal of operations research
PY  - 2023
SP  - 531 
VL  - 33
IS  - 4
PB  - mathdoc
UR  - http://geodesic.mathdoc.fr/item/YJOR_2023_33_4_a1/
LA  - en
ID  - YJOR_2023_33_4_a1
ER  - 
%0 Journal Article
%A Somdeb Lahiri
%T Expected utility for probabilistic prospects and the common ratio property
%J Yugoslav journal of operations research
%D 2023
%P 531 
%V 33
%N 4
%I mathdoc
%U http://geodesic.mathdoc.fr/item/YJOR_2023_33_4_a1/
%G en
%F YJOR_2023_33_4_a1
Somdeb Lahiri. Expected utility for probabilistic prospects and the common ratio property. Yugoslav journal of operations research, Tome 33 (2023) no. 4, p. 531 . http://geodesic.mathdoc.fr/item/YJOR_2023_33_4_a1/