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Theory and Decision

, Volume 60, Issue 1, pp 17–33 | Cite as

Axiomatization of a Preference for Most Probable Winner

  • Pavlo R. BlavatskyyEmail author
Article

Abstract

In binary choice between discrete outcome lotteries, an individual may prefer lottery L1 to lottery L2 when the probability that L1 delivers a better outcome than L2 is higher than the probability that L2 delivers a better outcome than L1. Such a preference can be rationalized by three standard axioms (solvability, convexity and symmetry) and one less standard axiom (a fanning-in). A preference for the most probable winner can be represented by a skew-symmetric bilinear utility function. Such a utility function has the structure of a regret theory when lottery outcomes are perceived as ordinal and the assumption of regret aversion is replaced with a preference for a win. The empirical evidence supporting the proposed system of axioms is discussed.

Keywords

expected utility theory axiomatization betweenness fanning-in skew-symmetric bilinear utility regret theory 

JEL Classification

C91 D81 

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Copyright information

© Springer 2006

Authors and Affiliations

  1. 1.Institute for Empirical Research in EconomicsUniversity of ZurichZurichSwitzerland

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