Economic Consequences of Nonexpected Utility Theory: A Game Theoretic Analysis

点击翻译按钮获取中文摘要

Recent years have witnessed a growing interest in models of decision making under uncertainty that do not assume the independence axiom of the von Neumann-Morgenstern utility theory. The interest in these theories is motivated by the large body of experimental evidence suggesting that decision makers systematically violate the independence axiom. Nonexpected utility theories have been shown to be capable of explicating this experimental evidence, and, at the same time, under appropriate assumptions, of preserving many of the useful economic implications of expected utility theory. The contribution of this project comes in identifying the economic implications of this theory that are different from expected utility theory. The project explores two main areas using the new theories of individual decision making under uncertainty: auction theory and bargaining theory. In both cases the project defines the equilibrium of the relevant game and establishes the conditions for its existence. The differences in the formulation and in the outcome of the games resulting from the nonlinearity of the preferences over the space of probability distributions is examined. A by product of this effort is the reexamination of the formulation of extensive form games made necessary by the introduction of preferences that are not representable by expected utility functionals. This is done in the context of specific games, but the results should be relevant to extensive form games in general.