Title

Probabilistic Sophistication and Stochastic Monotonicity in the Savage Framework

Document Type

Discussion Paper

Publication Date

8-1-2007

CFDP Number

1621

CFDP Pages

15

Abstract

Machina and Schmeidler (1992) show that probabilistic sophistication can be obtained in a Savage setting without imposing expected utility by dropping Savage’s axiom P2 (sure-thing principle) and strengthening his axiom P4 (weak comparative probability). Their stronger axiom, however, embodies a degree of separability analogous to P2. In this note, we obtain probabilistic sophistication using Savage’s original axiom P4 and a weaker analog of Savage’s P2.

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