Nothing Special   »   [go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/boc/bocoec/998.html
   My bibliography  Save this paper

All probabilities are equal, but some probabilities are more equal than others

Author

Listed:
  • Christina Letsou

    (Boston College)

  • Shlomo Naeh

    (Hebrew University of Jerusalem)

  • Uzi Segal

    (Boston College)

Abstract
A common procedure for selecting people is to have them draw balls from an urn in turn. Modern and ancient stories suggest that such lotteries may be viewed by the individuals as “unfair.” We compare this procedure with several alternatives. They all give individuals equal chance of being selected, but have different structures. We an- alyze these procedures as multistage lotteries. In line with previous literature, our analysis is based on the observation that multistage lotteries are not considered indifferent to their probabilistic one-stage representations. We use a non-expected utility model and show that individuals have preferences over the different procedures.

Suggested Citation

  • Christina Letsou & Shlomo Naeh & Uzi Segal, 2020. "All probabilities are equal, but some probabilities are more equal than others," Boston College Working Papers in Economics 998, Boston College Department of Economics.
    • Handle: RePEc:boc:bocoec:998
    as

    Download full text from publisher

    File URL: http://fmwww.bc.edu/EC-P/wp998.pdf
    File Function: main text
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Segal, Uzi, 1990. "Two-Stage Lotteries without the Reduction Axiom," Econometrica, Econometric Society, vol. 58(2), pages 349-377, March.
    2. Mohammed Abdellaoui & Peter Klibanoff & Lætitia Placido, 2015. "Experiments on Compound Risk in Relation to Simple Risk and to Ambiguity," Management Science, INFORMS, vol. 61(6), pages 1306-1322, June.
    3. Yaari, Menahem E, 1987. "The Dual Theory of Choice under Risk," Econometrica, Econometric Society, vol. 55(1), pages 95-115, January.
    4. Hong, Chew Soo & Karni, Edi & Safra, Zvi, 1987. "Risk aversion in the theory of expected utility with rank dependent probabilities," Journal of Economic Theory, Elsevier, vol. 42(2), pages 370-381, August.
    5. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
    6. Segal, Uzi, 1987. "Some remarks on Quiggin's anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 8(1), pages 145-154, March.
    7. Segal, Uzi, 1987. "The Ellsberg Paradox and Risk Aversion: An Anticipated Utility Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(1), pages 175-202, February.
    8. Edi Karni & Zvi Safra, 2002. "Individual Sense of Justice: A Utility Representation," Econometrica, Econometric Society, vol. 70(1), pages 263-284, January.
    9. Gul, Faruk, 1991. "A Theory of Disappointment Aversion," Econometrica, Econometric Society, vol. 59(3), pages 667-686, May.
    10. Yoram Halevy, 2007. "Ellsberg Revisited: An Experimental Study," Econometrica, Econometric Society, vol. 75(2), pages 503-536, March.
    11. Peter Klibanoff & Massimo Marinacci & Sujoy Mukerji, 2005. "A Smooth Model of Decision Making under Ambiguity," Econometrica, Econometric Society, vol. 73(6), pages 1849-1892, November.
    12. Harrison, Glenn W. & Martínez-Correa, Jimmy & Swarthout, J. Todd, 2015. "Reduction of compound lotteries with objective probabilities: Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 119(C), pages 32-55.
    13. David Dillenberger & Uzi Segal, 2021. "Allocation Mechanisms without Reduction," American Economic Review: Insights, American Economic Association, vol. 3(4), pages 455-470, December.
    14. Eliaz, Kfir & Rubinstein, Ariel, 2014. "On the fairness of random procedures," Economics Letters, Elsevier, vol. 123(2), pages 168-170.
    15. Epstein, Larry G & Segal, Uzi, 1992. "Quadratic Social Welfare Functions," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 691-712, August.
    16. Peter A. Diamond, 1967. "Cardinal Welfare, Individualistic Ethics, and Interpersonal Comparison of Utility: Comment," Journal of Political Economy, University of Chicago Press, vol. 75(5), pages 765-765.
    17. Bernasconi, Michele & Bernhofer, Juliana, 2020. "Catch Me If You Can: Testing the reduction of compound lotteries axiom in a tax compliance experiment," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 84(C).
    18. Chris Starmer, 2000. "Developments in Non-expected Utility Theory: The Hunt for a Descriptive Theory of Choice under Risk," Journal of Economic Literature, American Economic Association, vol. 38(2), pages 332-382, June.
    19. John C. Harsanyi, 1955. "Cardinal Welfare, Individualistic Ethics, and Interpersonal Comparisons of Utility," Journal of Political Economy, University of Chicago Press, vol. 63(4), pages 309-309.
    20. Kreps, David M & Porteus, Evan L, 1978. "Temporal Resolution of Uncertainty and Dynamic Choice Theory," Econometrica, Econometric Society, vol. 46(1), pages 185-200, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yoram Halevy & Emre Ozdenoren, 2022. "Uncertainty and compound lotteries: calibration," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 74(2), pages 373-395, September.
    2. Jianjun Miao, 2022. "Introduction to the special issue in honor of Larry Epstein," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 74(2), pages 329-333, September.
    3. Zhuzhu Zhou, 2024. "Ranking blame," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 78(2), pages 403-441, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dillenberger, David & Segal, Uzi, 2017. "Skewed noise," Journal of Economic Theory, Elsevier, vol. 169(C), pages 344-364.
    2. Zvi Safra & Uzi Segal, 2005. "Are Universal Preferences Possible? Calibration Results for Non-Expected Utility Theories," Boston College Working Papers in Economics 633, Boston College Department of Economics.
    3. Meng, Jingyi & Webb, Craig S. & Zank, Horst, 2024. "Mixture independence foundations for expected utility," Journal of Mathematical Economics, Elsevier, vol. 111(C).
    4. Karni, Edi & Maccheroni, Fabio & Marinacci, Massimo, 2015. "Ambiguity and Nonexpected Utility," Handbook of Game Theory with Economic Applications,, Elsevier.
    5. Dean, Mark & Ortoleva, Pietro, 2017. "Allais, Ellsberg, and preferences for hedging," Theoretical Economics, Econometric Society, vol. 12(1), January.
    6. Mohammed Abdellaoui & Horst Zank, 2023. "Source and rank-dependent utility," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 75(4), pages 949-981, May.
    7. Treich, Nicolas, 2010. "The value of a statistical life under ambiguity aversion," Journal of Environmental Economics and Management, Elsevier, vol. 59(1), pages 15-26, January.
    8. Ilke Aydogan & Loic Berger & Valentina Bosetti & Ning Liu, 2018. "Three layers of uncertainty: an experiment," Working Papers 623, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    9. Ilke Aydogan & Loïc Berger & Valentina Bosetti & Ning Liu, 2023. "Three Layers of Uncertainty," Journal of the European Economic Association, European Economic Association, vol. 21(5), pages 2209-2236.
    10. Evren, Özgür, 2019. "Recursive non-expected utility: Connecting ambiguity attitudes to risk preferences and the level of ambiguity," Games and Economic Behavior, Elsevier, vol. 114(C), pages 285-307.
    11. David Dillenberger & Uzi Segal, 2021. "Allocation Mechanisms without Reduction," American Economic Review: Insights, American Economic Association, vol. 3(4), pages 455-470, December.
    12. Özgür Evren, 2017. "Cautious and Globally Ambiguity Averse," Working Papers w0236, New Economic School (NES).
    13. repec:hal:journl:hal-03031751 is not listed on IDEAS
    14. McCarthy, David & Mikkola, Kalle & Thomas, Teruji, 2020. "Utilitarianism with and without expected utility," Journal of Mathematical Economics, Elsevier, vol. 87(C), pages 77-113.
    15. McCarthy, David & Mikkola, Kalle & Thomas, Teruji, 2016. "Utilitarianism with and without expected utility," MPRA Paper 72578, University Library of Munich, Germany.
    16. Safra, Zvi & Segal, Uzi, 1998. "Constant Risk Aversion," Journal of Economic Theory, Elsevier, vol. 83(1), pages 19-42, November.
    17. Grant, Simon & Kajii, Atsushi, 1998. "AUSI expected utility: An anticipated utility theory of relative disappointment aversion," Journal of Economic Behavior & Organization, Elsevier, vol. 37(3), pages 277-290, November.
    18. Keyu Wu & Ernst Fehr & Sean Hofland & Martin Schonger, 2024. "On the Psychological Foundations of Ambiguity and Compound Risk Aversion," CESifo Working Paper Series 11150, CESifo.
    19. Yoram Halevy & Emre Ozdenoren, 2022. "Uncertainty and compound lotteries: calibration," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 74(2), pages 373-395, September.
    20. Laurent Denant-Boemont & Olivier L’Haridon, 2013. "La rationalité à l'épreuve de l'économie comportementale," Revue française d'économie, Presses de Sciences-Po, vol. 0(2), pages 35-89.
    21. Zvi Safra & Uzi Segal, 2021. "Large Compound Lotteries," Boston College Working Papers in Economics 1057, Boston College Department of Economics, revised 01 Aug 2023.

    More about this item

    Keywords

    Fair lotteries; non-expected utility; multi-stage lotteries;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:boc:bocoec:998. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christopher F Baum (email available below). General contact details of provider: https://edirc.repec.org/data/debocus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.