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| Type | Working Paper |
| Scope | Discipline-based scholarship |
| Title | Stochastic Utility Theorem |
| Organization Unit | |
| Authors |
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| Language |
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| Institution | University of Zurich |
| Series Name | Working paper series / Institute for Empirical Research in Economics |
| Number | No. 311 |
| ISSN | 1424-0459 |
| Date | 2007 |
| Abstract Text | This paper analyzes individual decision making under risk. It is assumed that an individualndoes not have a preference relation on the set of risky lotteries. Instead, an individual possesses a probability measure that captures the likelihood of one lottery being chosen over the other. Choice probabilities have a stochastic utility representation if they can benwritten as a non-decreasing function of the difference in expected utilities of the lotteries.nChoice probabilities admit a stochastic utility representation if and only if they are complete, strongly transitive, continuous, independent of common consequences andninterchangeable. Axioms of stochastic utility are consistent with systematic violations of betweenness and a common ratio effect but not with a common consequence effect. Special cases of stochastic utility include the Fechner model of random errors, Luce choice model and a tremble model of Harless and Camerer (1994). |
| Official URL | http://www.econ.uzh.ch/wp.html |
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