Utility and Probability
This is an excerpt from the 4-volume dictionary of economics, a reference book which aims to define the subject of economics today. 1300 subject entries in the complete work cover the broad themes of economic theory. This extract concentrates on utility a
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PALGRAVE
UT LlTY AND PROBAB LTY
THE NEW
PALGRAVE
TLITY AND PROBAB LTY EDITED BY
JOHN EATWELL . MURRAYMILGATE . PETER NEWMAN
M
MACMILLAN REFERENCE BOOKS
© The Macmillan Press Limited, 1987, 1990 Softcover reprint of the hardcover 1st edition 1990 All rights reserved. No part of this publication may be reproduced or transmitted, in any form or by any means, without permission. First published in The New Palgrave: A Dictionary of Economics Edited by John Eatwell, Murray Milgate and Peter Newman in four volumes, 1987 Published in the United Kingdom by THE MACMILLAN PRESS LIMITED, 1990 London and Basingstoke Associated companies in Auckland, Delhi, Dublin, Gaborone, Hamburg, Harare, Hong Kong, Johannesburg, Kuala Lumpur, Lagos, Manzini, Maseru, Melbourne, Mexico City, Nairobi, New York, Singapore, Tokyo. The New Palgrave is a trademark of The Macmillan Press Limited British Library Cataloguing in Publication Data The New Palgrave: utility and probability 1. Demand. Analysis I. Eatwell, John II. Milgate, Murray III. Newman, Peter 338.5'212 ISBN 978-0-333-49541-4 ISBN 978-1-349-20568-4 (eBook) DOI 10.1007/978-1-349-20568-4
Contents
vi vii xi
Acknowledgements General Preface Preface Acyclicity Allais paradox Thomas Bayes Daniel Bernoulli Bounded rationality Certainty equivalent Contingent commodities Economic theory and the hypothesis of rationality Francis Ysidro Edgeworth Expected utility and mathematical expectation Expected utility hypothesis Bruno de Finetti Herman Heinrich Gossen Impatience Induction Interdependent preferences Interpersonal utility comparisons Lexicographic orderings Myopic decision rules Orderings Perfect foresight Preferences
Douglas Blair Maurice Allais D. V. Lindley S.L. Zabell Herbert A. Simon Xavier Freixas Zvi Safra Kenneth J. Arrow Peter Newman David Schmeidler and Peter Wakker Mark J. Machina Giancarlo Gandolfo Jurg Niehans Larry G. Epstein Paul W. Humphreys Peter C. Fishburn John C. Harsanyi C. Blackorby Mordecai Kurz C. Blackorby Margaret Bray Georg Henrik von Wright
1 3
10
12 15 19 22 25 38 70 79 96 99 108 116 121 128 134 136 142 144 149 v
Contents Preference reversals Preordering Probability Psychology and economics Frank Plumpton Ramsey Rational behaviour Representation of preferences Risk Leonard 1. Savage State-dependent preferences State preference approach Stochastic dominance Subjective probability Time preference Transitivity Uncertainty Utility Utility theory and decision theory
Edi Karni C. Blackorby Ian Hacking Charles R. Plott Peter Newman Amartya Sen Peter C. Fishburn Mark 1. Machina and Michael Rothschild I. Richard Savage Edi Karni H.M. Polemarchakis Haim Levy 1.1. Good Murray N. Rothbard Wayne Shafer Peter 1. Hammond R.D. Collison Black Peter C. Fishburn
Contributors
157 161 163 178 186 198 217 227 240 242 248 251 255 270 276 280 295 303 313
Acknowledgements The following contributor (article shown in parenthesis) acknowledges support from public bodies and permission to reprint copyright material: Kenneth 1. Arrow (Economic Theory and the Hypothesi
