When is there state independence?

Hill, Brian

doi:10.1016/j.jet.2008.11.008

Cited by 8 publications

(3 citation statements)

References 16 publications

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“…x, and u s 4 (x) = − √ x. None of the rare attempts to generalize both P3 and P4 (see, in particular, Karni, 1992, Karni, 1993, and Hill, 2009 can cope with this simple case. However, given the variety of non-affine transformations possible, it is the simplest of its class.…”

Section: Conceptual Discussion Of Moral Hazardmentioning

confidence: 99%

Moral Hazard, the Savage Framework, and State-Dependent Utility

Baccelli

2017

SSRN Journal

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In this paper, I investigate the betting behavior of a decision-maker who can influence the likelihood of the events upon which she is betting. In decision theory, this is best known as a situation of moral hazard. Focusing on a particularly simple case, I sketch the first systematic analysis of moral hazard in the canonical Savage framework. From the results of this analysis, I draw two philosophical conclusions. First, from an observational and a descriptive point of view, there need to be no incompatibility between moral hazard and the Savage framework. This qualifies the incompatibility view, that is ubiquitous in decision theory. Second, in general, moral hazard is not sufficient to overcome the challenges posed by state-dependent utility to the behavioral identification of beliefs. This qualifies the sufficiency view, that is influential in decision theory. These two philosophical conclusions are the main contributions of my paper.

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Section: Conceptual Discussion Of Moral Hazardmentioning

confidence: 99%

Moral Hazard, the Savage Framework, and State-Dependent Utility

Baccelli

2017

SSRN Journal

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“…For the latter, they constitute the ‘safe options’, of sure precise value, that play a role in the axiomatizations of many popular ambiguity models (Schmeidler (), Gilboa and Schmeidler (), Ghirardato, Maccheroni, and Marinacci (), Maccheroni, Marinacci, and Rustichini ()), as well as in the definition of notions such as relative ambiguity aversion (Ghirardato and Marinacci ()). In the face of this challenge, we mobilize an insight from the literature on state‐dependent utility (Drèze (), Karni (, ), Hill ()), namely, to use essentially constant acts : acts that, though they yield different consequences in different states, yield the same precise utility in all states. In our model, the set of mixtures of ⪰‐best‐and‐worst acts

\overset{h}{true}

\underline{h}

(i.e.,

false{{\overset{h}{true}}_{α} \underline{h} : α \in false[0, 1 false] false}

) will be a set of essentially constant acts; this comes out in the formulation of the uncertainty aversion axiom.…”

Section: Benchmark Modelmentioning

confidence: 99%

A Non‐Bayesian Theory of State‐Dependent Utility

Hill

2019

ECTA

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Many decision situations involve two or more of the following divergences from subjective expected utility: imprecision of beliefs (or ambiguity), imprecision of tastes (or multi‐utility), and state dependence of utility. This paper proposes and characterizes a model of uncertainty averse preferences that can simultaneously incorporate all three phenomena. The representation supports a principled separation of (imprecise) beliefs and (potentially state‐dependent, imprecise) tastes. Moreover, the representation permits comparative statics separating the roles of beliefs and tastes, and is modular: it easily delivers special cases involving various combinations of the phenomena, as well as state‐dependent multi‐utility generalizations covering popular ambiguity models.

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“…When a state-independent utility representation exists, does there exist an alternative state-dependent utility representation? This should be carefully distinguished from the following question (investigated in, e.g.,Karni, 1993;Wakker and Zank, 1999;Hill, 2009). When no state-independent utility representation exists, does there exist a state-dependent utility representation?…”

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confidence: 99%

The Problem of State-Dependent Utility: A Reappraisal

Baccelli¹

2021

The British Journal for the Philosophy of Science

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State-dependent utility is a problem for the behavioural branch of decision theory under uncertainty. It questions the very possibility that beliefs be revealed by choice data. According to the current literature, all models of beliefs are equally exposed to the problem. Moreover, the problem is solvable only when the decision-maker can influence the resolution of uncertainty. This article gives grounds to reject these two views. The various models of beliefs can be shown to be unequally exposed to the problem of state-dependent utility. The problem can be argued to be solved even when the decision-maker has no influence over the resolution of uncertainty. The implications of such reappraisal for a philosophical appreciation of the revealed preference methodology are discussed. 1Introduction2The Problem of State-Dependent Utility: An Exposition3The Current State of the State-Dependent Utility Literature4On State-Dependent Utility and Moral Hazard5The Problem of State-Dependent Utility: A Reappraisal6Implications for the Revealed Preference Methodology7ConclusionAppendix

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When is there state independence?

Cited by 8 publications

References 16 publications

Moral Hazard, the Savage Framework, and State-Dependent Utility

Moral Hazard, the Savage Framework, and State-Dependent Utility

A Non‐Bayesian Theory of State‐Dependent Utility

The Problem of State-Dependent Utility: A Reappraisal

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