considers the economic implications of generalized EU theories. Finally, some conclud-
ing comments are presented.
12.2 THE EU MODEL
In a standard problem of choice under risk, the objects of choice are simple lot-
teries
p=
x
1
...x
N
;p
1
...p
N
over some finite set of prizes
x
n
∈X,n=1...N
for some output space X. The probability of receiving x
n
is given by the probability
p
n
,0≤p
n
≤1,
n
p
n
=
1
. The set of all such lotteries is denoted P and preferences over
P are represented by an ordering
with associated indifference relation ~ and strict
ordering. More generally, we may consider cumulative probability distribution functions ...
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