Consequentialist foundations for expected utility |
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Authors: | Peter J Hammond |
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Institution: | (1) Department of Economics, Stanford University, Stanford, U.S.A. |
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Abstract: | Behaviour norms are considered for decision trees which allow both objective probabilities and uncertain states of the world with unknown probabilities. Terminal nodes have consequences in a given domain. Behaviour is required to be consistent in subtrees. Consequentialist behaviour, by definition, reveals a consequence choice function independent of the structure of the decision tree. It implies that behaviour reveals a revealed preference ordering satisfying both the independence axiom and a novel form of sure-thing principle. Continuous consequentialist behaviour must be expected utility maximizing. Other plausible assumptions then imply additive utilities, subjective probabilities, and Bayes' rule. |
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Keywords: | Expected utility subjective probability decision trees Bayes' rule consequentialist behaviour |
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