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Erkenntnis

pp 1–21 | Cite as

Moral Hazard, the Savage Framework, and State-Dependent Utility

  • Jean BaccelliEmail author
Original Research
  • 14 Downloads

Abstract

In this paper, I investigate the betting behavior of a decision-maker who can influence the likelihood of the events upon which she is betting. In decision theory, this is best known as a situation of moral hazard. Focusing on a particularly simple case, I sketch the first systematic analysis of moral hazard in the canonical Savage framework. From the results of this analysis, I draw two philosophical conclusions. First, from an observational and a descriptive point of view, there need to be no incompatibility between moral hazard and the Savage framework. This qualifies the incompatibility view, that is ubiquitous in decision theory. Second, in general, moral hazard is not sufficient to overcome the challenges posed by state-dependent utility to the behavioral identification of beliefs. This qualifies the sufficiency view, that is influential in decision theory. These two philosophical conclusions are the main contributions of my paper.

Notes

Acknowledgements

Funding was provided by the Wagemann Foundation and the Ludwig-Maximilians-Universität München.

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Copyright information

© Springer Nature B.V. 2019

Authors and Affiliations

  1. 1.Munich Center for Mathematical PhilosophyMunichGermany

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