This preview shows page 1. Sign up to view the full content.
Unformatted text preview: Expected utility : Note that the function U ( p ) is linear: U ( K k = 1 k p k ) = X z Z [ K k = 1 k p k ] ( z ) v ( z ) = X z Z [ K X k = 1 k p k ( z ) ] v ( z ) = K X k = 1 k [ X z Z p k ( z ) v ( z ) ] = K X k = 1 k U ( p k ). It follows that any such preference relation satisFes I . Since the function U ( p ) is continuous in the probability vector, it also satisFes C . Increasing the probability of a good consequence : Such a pref-erence relation satisFes the two axioms since it can be repre-sented by the expectation of v where v ( z ) = 1 for z G and v ( z ) = 0 for z B ....
View Full Document
- Fall '10