Axiomatization of a Preference for Most Probable Winner
نویسندگان
چکیده
1 L to lottery 2 L when the probability that 1 L delivers a better outcome than 2 L is higher than the probability that 2 L delivers a better outcome than 1 L . Such a preference can be rationalized by three standard axioms (completeness, continuity and first order stochastic dominance) and two less standard ones (weak independence and a fanning-in). A preference for the most probable winner can be represented by a skew-symmetric bilinear utility function. Such a utility function has the structure of a regret theory when lottery outcomes are perceived as ordinal and the assumption of regret aversion is replaced with a preference for a win. The empirical evidence supporting the proposed system of axioms is discussed.
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