Probabilistic Sophistication and Variational Preferences
Publication information:
Strzalecki, T. Probabilistic Sophistication and Variational Preferences. Journal of Economic Theory 146, 2117–2125 (2011).
Abstract
This paper shows that in the class of variational preferences the notion of probabilistic sophistication is equivalent to expected utility as long as there exists at least one event such that the independence axiom holds for bets on that event. This extends a result of Marinacci (2002) and provides a novel interpretation of his result.