I.A.1.3 The Axiom of Independence of Choice

Question 1

J. Von Neumann and O. Morgenstern (1947)

Answer 1

• Postulated a basic set of rules frow which it will follow that a utility function provides a complete description of an individual’s risk attitude
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Question 2

Axiom of independence of choice

Answer 2

• A choice between two gambles should not be influenced by the way the gambles are presented, probided that all presentations contain the same relevant information’
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Question 3

Daniel Kahneman and Amos Tversky (1979)

Answer 3

• Created a test to show how a change of presentation can affect our decisions
• Based on their findings they suggested that people are generally risk averse when choosing between a sure gain and a change of a larger gain, but the same people may take a chance wehn forced to choose between a sure loss and only a probability of a worse loss