COWLES FOUNDATION FOR RESEARCH IN ECONOMICS
AT YALE UNIVERSITY

Box 208281
New Haven, CT 06520-8281

COWLES FOUNDATION DISCUSSION PAPER NO. 746

"An Axiomatization of Utility and Subjective Probability Based on Objective Probability"

Mamoru Kaneko

April 1985

This paper provides an axiomatic model based on an extraneous random device generating objective probabilities for the derivation of expected utilities and subjective probabilities. Four basic axioms fully determine a real-valued utility function and a finitely additive subjective probability measure. The restrictions of these axioms to lotteries depending only upon events of the random device yield the von Neumann-Morgenstern axioms.

JEL Classification: 026, 022

Keywords: Real-world event, auxiliary event, objective probabilities, subjective probabilities, von Neumann-Morgenstern axioms