Journal of Risk and Uncertainty

, Volume 1, Issue 4, pp 355–387 | Cite as

Ordinal independence in nonlinear utility theory

  • Jerry R. Green
  • Bruno Jullien

Abstract

Individual behavior under uncertainty is characterized using a new axiom, ordinal independence, which is a weakened form of the von Neumann-Morgenstern independence axiom It states that if two distributions share a tail in common, then this tail can be modified without altering the individual's preference between these distributions. Preference is determined by the tail on which the distributions differ. This axiom implies an appealing and simple functional form for a numerical representation of preferences. It generalizes the form of anticipated utility, and it explains some well-known forms of behavior, such as the Friedman-Savage paradox, that anticipated utility cannot.

Key words

ordinal independence nonlinear utility theory preferences 

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Copyright information

© Kluwer Academic Publishers 1988

Authors and Affiliations

  • Jerry R. Green
    • 1
  • Bruno Jullien
    • 2
  1. 1.Harvard UniversityUSA
  2. 2.Harvard UniversityUSA

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