Random Expected Utility
Faruk Gul, Wolfgang Pesendorfer
Econometrica · 2006 · Volume 74 · Issue 1
DOI: 10.1111/j.1468-0262.2006.00651.x
Abstract
We develop and analyze a model of random choice and random expected utility. Adecision problemis a finite set of lotteries that describe the feasible choices. Arandom choice ruleassociates with each decision problem a probability measure over choices. Arandom utility functionis a probability measure over von Neumann–Morgenstern utility functions. We show that a random choice rule maximizes some random utility function if and only if it ismixture continuous,monotone(the probability that a lottery is chosen does not increase when other lotteries are added to the decision problem),extreme(lotteries that are not extreme points of the decision problem are chosen with probability 0), andlinear(satisfies the independence axiom).
Keywords
Random utility, random choice, expected utility
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