Functional characterizations of basic properties of utility representations

DOI10.1007/S006050200024MaRDI QIDQ1606062zbMATH OpenOpenAlexFDO

Authors Che Tat Ng, R. Duncan Luce, János Aczél

Publication date 29 July 2002

Published in Monatshefte für Mathematik (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1007/s006050200024

zbMATH Keywords

event commutativityfunctional equationsgambleshomogeneitynon-commutative joint receiptrepresentation and uniqueness theoremssegregationseparabilityutility representations

Mathematics Subject Classification ID

Functional equations for real functions (39B22) Utility theory (91B16)

Review text

In this interesting paper, the authors give functional characterizations of some basic properties of utility representations. They consider several widely invoked properties of binary gambles such as event commutativity, separability, segregation, and homogeneity. Various combinations of these properties are characterized by functional equations. They show that event commutativity follows from the homogeneity and segregation. Among other the following mathematical result is established: Suppose \(M \in IIIC\). Then \(M\) satisfies the functional equation \[ M_w [M_{w^\prime}(p, q),q]= M_{w'} [ M_w(p,q),q], \qquad w,w'\in[0,1],\;0 \leq q \leq p<k \] if and only if it has the representation \[ \theta_q [ M_w(p,q)]= \psi_q(w)\theta_q(p), \qquad w \in [0,1], \;q \in [0, k), \;p \in [q, k). \] Here \(M_w\) denotes the function \(M\) with \(w\) held fixed, \(\theta_q : [q,k)\to [0, \infty)\) is a strictly increasing and continuous function with \(\theta_q (q) = 0\), and \(\psi_q : [0,1] \to [0,1]\) is an increasing bijection.

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