Are "lotteries" in the model for choice under uncertainty not just probability distributions?

  • 2
    $\begingroup$ Usually, yes. Details may vary (finite support or not, countable vs finite additivity...) $\endgroup$ – Michael Greinecker Jun 24 at 20:22
  • $\begingroup$ Alright, thank you. $\endgroup$ – Xenusi Jun 24 at 20:40

Yes. See for example this passage from Choice under Uncertainty by Jonathan Levin:

2.1 Prizes and Lotteries

The starting point for the model is a set $X$ of possible prizes or consequences. In many economic problems (and for much of this class), $X$ will be a set of monetary payoffs. But it need not be. If we are considering who will win Big Game this year, the set of consequences might be: $$X=\lbrace\text{Stanford wins}, \text{Cal wins}, \text{Tie}\rbrace.$$ We represent an uncertain prospect as a lottery or probability distribution over the prize space. For instance, the prospect that Stanford and Cal are equally likely to win Big Game can be written as $p=(1/2,1/2,0)$. Perhaps these probabilities depend on who Stanford starts at quarterback. In that case, there might be two prospects: $p$ or $p'=(5/9,3/9,1/9)$, depending on who starts.

(not sure what I was thinking yesterday evening. It seems like I completely misunderstood the question)

| improve this answer | |
  • 1
    $\begingroup$ I think they mean lotteries in the MWG sense of uncertain cash flow, not real life lotteries, which are a subset of this. $\endgroup$ – Giskard Jun 24 at 21:26
  • $\begingroup$ @Giskard you are right. if you can come with a better answer please do $\endgroup$ – Xenusi Jun 25 at 6:10
  • $\begingroup$ @Xenusi I think Michael Greinecker's comment is the appropriate answer. $\endgroup$ – Giskard Jun 25 at 7:04

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.