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Expected utility theory on mixture spaces without the completeness axiom

  • David McCarthy*
  • , Kalle Mikkola
  • , Teruji Thomas
  • *Corresponding author for this work
  • University of Hong Kong
  • University of Oxford

Research output: Contribution to journal › Article › Scientific › peer-review

5 Citations (Scopus)

Abstract

A mixture preorder is a preorder on a mixture space (such as a convex set) that is compatible with the mixing operation. In decision theoretic terms, it satisfies the central expected utility axiom of strong independence. We consider when a mixture preorder has a multi-representation that consists of real-valued, mixture-preserving functions. If it does, it must satisfy the mixture continuity axiom of Herstein and Milnor (1953). Mixture continuity is sufficient for a mixture-preserving multi-representation when the dimension of the mixture space is countable, but not when it is uncountable. Our strongest positive result is that mixture continuity is sufficient in conjunction with a novel axiom we call countable domination, which constrains the order complexity of the mixture preorder in terms of its Archimedean structure. We also consider what happens when the mixture space is given its natural weak topology. Continuity (having closed upper and lower sets) and closedness (having a closed graph) are stronger than mixture continuity. We show that continuity is necessary but not sufficient for a mixture preorder to have a mixture-preserving multi-representation. Closedness is also necessary; we leave it as an open question whether it is sufficient. We end with results concerning the existence of mixture-preserving multi-representations that consist entirely of strictly increasing functions, and a uniqueness result.

Original languageEnglish
Article number102538
Pages (from-to)1-16
Number of pages16
JournalJournal of Mathematical Economics
Volume97
DOIs
Publication statusPublished - Dec 2021
MoE publication typeA1 Journal article-refereed

Funding

We are grateful for extremely helpful advice from two anonymous reviewers. We also thank Efe Ok for invaluable discussion of the history of the subject. David McCarthy thanks the Research Grants Council of the Hong Kong Special Administrative Region, China ( HKU 750012H ) for support. Teruji Thomas thanks the Leverhulme trust for funding through the project ‘Population Ethics: Theory and Practice’ (RPG-2014-064). This is a heavily revised version of ‘Representation of strongly independent preorders by sets of scalar-valued functions’, MPRA Paper No. 80806, 2017.

Keywords

  • Archimedean structures
  • Continuity and closedness
  • Expected utility
  • Incompleteness
  • Mixture spaces
  • Multi-representation

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