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Decision Theory Without “Independence” or Without “Ordering”

What is the Difference?

Published online by Cambridge University Press:  05 December 2008

Teddy Seidenfeld
Teddy Seidenfeld
Affiliation:
Carnegie-Mellon University
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Extract

It is a familiar argument that advocates accommodating the so-called paradoxes of decision theory by abandoning the “independence” postulate. After all, if we grant that choice reveals preference, the anomalous choice patterns of the Allais and Ellsberg problems (reviewed in Section 3) violate postulate P2 (“sure thing”) of Savage's (1954) system. The strategy of making room for new preference patterns by relaxing independence is adopted in each of the following works: Samuelson (1950), Kahneman and Tversky's “Prospect Theory” (1979), Allais and Hagen (1979), Fishburn (1981), Chew and MacCrimmon (1979), McClennen (1983), and in closely argued essays by Machina (1982, 1983 [see the latter for an extensive bibliography]).

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Type
Essays
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Economics & Philosophy , Volume 4 , Issue 2 , October 1988, pp. 267 - 290
Copyright
Copyright © Cambridge University Press 1988

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