Econometrica: Jul, 1992, Volume 60, Issue 4

A More Robust Definition of Subjective Probability

https://doi.org/0012-9682(199207)60:4<745:AMRDOS>2.0.CO;2-A
p. 745-780

David Schmeidler, Mark J. Machina

The goal of choice-theoretic derivations of subjective probability is to separate a decision maker's underlying beliefs (subjective probabilities of events) from their preferences (attitudes toward risk). Classical derivations have all relied upon some form of the Marschak-Samuelson "Independence Axiom" or the Savage "Sure-Thing Principle," which imply that preferences over lotteries conform to the expected utility hypothesis. This paper presents a choice-theoretic derivation of subjective probability, in a Savage-type setting of purely subjective uncertainty, which neither assumes nor implies that the decision maker's preferences over lotteries necessarily conform to the expected utility hypothesis.