This paper reports the results of experiments designed to test whether and to what extent individuals succumb to the conjunction fallacy. Using the Kahneman and Tversky (1983) experimental design, we find that given mild incentives, the proportion of individuals who violate the conjunction...

In Harsanyi's impartial observer theorem, an impartial observer determines a social ordering of the lotteries on the set of social alternatives based on a sympathetic but impartial concern for all individuals in society. This ordering is derived from a more primitive ordering on the set of all...

In this paper we consider how the presence of private information may explain the failure of the private sector to provide unemployment insurance. In particular, we show how the interaction of private information regarding employees' preferences for work with the unobservable level of effort...

Choice-theoretic definitions of subjective probabilities originated with the work of Ramsey and de Finetti and attained their definitive form in the work of Savage. These probabilities are intended to provide a numerical representation of decision-maker's beliefs regarding the likely realization...

Building upon the works of Anscombe and Aumann (1963) and Karni and Schmeidler (1981), we develop a general axiomatic theory of quantifiable beliefs - a form of probabilistic sophistication that does not preclude state-dependent preferences and does not require the reduction of compound...

In this paper, we report the results of experiments designed to test whether individuals and groups abide by the axioms of monotonicity, with respect to first-order stochastic dominance and Bayesian updating, when making decisions in the face of risk. The results indicate a significant number of...

This article contains an analysis of a simple principal-agent problem illustrating possible problems that may arise when the prinicpal ascribes to the agent subjective probabilities and utilities that are implied by the subjective expected utility model but do not represent the agent's beliefs...

We present an axiomatic model depicting the choice behavior of a self-interest seeking moral individual over random allocation procedures. Individual preferences are decomposed into a self-interest component and a component representing the individual's moral value judgment. Each component has a...

Utility theory with uncertainty describes a class of models designed to formalize the manner in which a decision maker chooses among alternative courses of action when the consequences of each course of action are not known at the time the choice is made. The distinguishing characteristic of the...

This chapter reviews developments in the theory of decision making under risk and uncertainty, focusing on models that, over the last 40 years, dominated the theoretical discussions. It also surveys some implications of the departures from the “linearity in the probabilities” aspect of...