# Tag Info

Accepted

### Topological concepts in economic theory

I strongly suspect that an emerging important area for applications of measure theory will be in approximate dynamic programming techniques. Approximate dynamic programming (aka "reinforcement ...
• 1,048

### Experiments contradicting the expected utility model

this paper http://else.econ.ucl.ac.uk/papers/uploaded/243.pdf (Choi 2007) has a nice state of the art experiment that deals with rationality and expected utility is a special case of it. In general ...
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### What is the importance of Epstein-Zin preferences?

This is only a quick answer, unfortunately. The key intuitive insight for Epstein-Zin is that they separate two distinct properties of preferences: risk aversion ("I'd prefer less uncertainty to more ...
• 1,048
Accepted

### Continuity Axiom in Expected Utility Theory

It is. Prior to continuity, which is a property of the preference relation, the preference relation $\succsim$ itself has been defined to be a binary relation that is characterized by transitivity, ...
• 31.8k
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### What is the importance of Epstein-Zin preferences?

I think CompEcon covered most of the points that I was going to mention. Just a few last thoughts: 1) Why are Epstein-Zin preferences important? The preferences are important because they allow you ...
• 1,563

### Is there an economic analysis of the rationality of buying lottery tickets?

There are definitely economic justifications for playing the lottery, even if all (I hope) players understand that it is unlikely to pay off. One such justification is that what you actually buy when ...
• 3,721
Accepted

### Why stochastic dominance is "stochastic"?

In the below figure, CDF $F(\cdot)$ is first-order stochastically dominated by $G(\cdot)$. But $X_1$ and $X_2$ fall within the support of both distributions. So it would be possible to draw $X_1$ from ...
• 16.6k
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### Preference over lotteries without independence axiom

No, not necessarily. Without the independence axiom (or something else to replace it) there is not much you can infer about preferences over (non-degenerate) lotteries from knowing preferences over ...

### Experiments contradicting the expected utility model

Adding to the list of paradoxes, consider Machina's paradox. It is described in Mas-Colell, Whinston and Green's Microeconomic Theory. A person prefers a trip to Paris to watching a television ...
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### Topological concepts in economic theory

This was too long for comment. "Post 1960" seems an arbitrary and very high bar for an applied field, including micro theory. Most of the topics you name would not be considered contemporary ...
• 2,559

### Consequences of hyperbolic discounting

As often with models embodying some form of "irrationality" (whatever that means), HD does a great job at matching a whole lot of behaviors, but leaves room for rather annoying Dutch Book situations (...
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### Independence axiom of lottery when $\alpha \ge 1$

To understand why $\alpha$ must be constrained in $(0,1)$, one has to contemplate the meaning of the expression $$\alpha L$$ when $L$ is a "lottery". How is a lottery denoted mathematically? Authors ...
• 31.8k
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### Which of Anscombe-Aumann's axioms imply the Sure-Thing principle?

As a first remark: the Anscombe-Aumann axioms, in particular Independence, are defined over acts taking the state space to a linear space (generally simple lotteries over consumption objects). Even ...
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### What is the point of considering only pure strategies in a game? How could you restrict people from thinking about mixed strategy?

If in equilibrium, a player "chooses a mixed strategy" that plays $H$ and $T$ with positive probability, $H$, and $T$ must be both optimal choices. It is a standard result that for a (...
• 9,705

### Is there an economic analysis of the rationality of buying lottery tickets?

I want to add some other justifications for buying lottery tickets: general risk-seeking behavior (which is probably pretty rare) risk-seeking when it comes to low monetary values (Cumulative ...
• 1,682
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### What are good mathematics books to learn decision theory?

I do not know about social choice, but for utility representations I think the two most cited books are "Convex analysis" by Rockafellar and "Infinite Dimensional Analysis: A Hitchhiker's Guide" by ...
• 3,202

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### Ordinally Separable Utility Representation

Here is the sketch of a proof. All we need is that every continuous weak order on each $X_i$ admits a continuous utility representation. One sufficient condition is that each $X_i$ is a connected ...
• 9,705
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### Do a group of economic agents really act as if they are rational?

The literature is full of examples in which either individual rationality leads to aggregate rationality individual rationality does not yield aggregate rationality (when public goods or ...
• 2,552

### Most utility functions under risk and uncertainty generalizes expected utility. What is deadly wrong if a model does not include EU as special case?

Many people accept the axiomatizations of expected utility as normatively appealing, especially in contexts of pure risk. For people with this view, rational decision-makers should behave in ...
• 9,705
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### Does Debreu's representation theorem of ordinal utility require Hausdorff topology?

No. However, the problem can be reduced to representing preferences on a Hausdorff space. Instead of trying to represent a complete preorder on a set, one can try to represent linear orders on the ...
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