This preview shows page 1. Sign up to view the full content.
Unformatted text preview: volves a procedural aspect of decision making. The axiomatization of a family of preference relations provides justication for focusing on that specic family. Von NeumannMorgenstern Axiomatization The version of the von NeumannMorgenstern axiomatization presented here uses two axioms, the independence and continuity axioms. The Independence Axiom In order to state the rst axiom we require an additional concept, called Compound lotteries (g. 8.1): Given a Ktuple of lotteries ( p k ) and a Ktuple of nonnegative numbers ( k ) k = 1, ... , K that sum up to 1, dene K k = 1 k p k to be the lottery for which ( K k = 1 k p k )( z ) = K k = 1 k p k ( z ) . Verify that K k = 1 k p k is indeed a lottery. When only two lotteries p 1 and p 2 are involved, we use the notation 1 p 1 ( 1 1 ) p 2 ....
View
Full
Document
This note was uploaded on 12/29/2011 for the course ECO 443 taught by Professor Aswa during the Fall '10 term at SUNY Stony Brook.
 Fall '10
 aswa
 Utility

Click to edit the document details