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Duisenberg school of finance is a collaboration of the Dutch financial sector and universities, with the ambition to support innovative research and offer top quality academic education in core areas of finance.

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(Article begins on next page) The Harvard community has made this article openly available. Please share how this access benefits you. Your story matters. Citation Green, Jerry. 1987. "Making book against oneself, " theindependence axiom, and nonlinear utility theory. Quarterly

IT is well known that there are a number of sets of axioms for Boolean algebra. In this paper, I give a set of five independent axioms using conditioned disjunction as the ternary operation which is postulated. The ternary operation is most naturally defined on the set 2 n —this is done in

We re-introduce an experimental device, the uncertainty equivalent, that provides a direct test of the independence axiom’s critical implication of linearityin-probability. In a within-subject experiment with both uncertainty and certainty equivalents we demonstrate several key results. Using

There is convincing experimental evidence that Expected Utility fails, but when does it fail, how severely, and for what fraction of subjects? We explore these questions using a novel measure we call the uncertainty equivalent. We find Expected Utility performs well away from certainty, but fails near certainty for about 40 % of subjects. Comparing non-Expected Utility theories, we strongly reject Prospect Theory probability weighting, we support disappointment aversion if amended to allow violations of stochastic dominance, but find the u-v model of a direct preference for certainty the most parsimonious approach.

, for instance, as part of system specifications. However, automated theorem provers struggle finding proofs when there are too many axioms available. This paper presents and investigates two approaches to reduce the load on automated theorem provers by preselecting axioms: 1) a generalisation of the SIn

First expressed by Allais in the early fifties, dissatisfaction with the expected utility model of individual risk taking behavior has mushroomed in recent years, as the number of papers in this volume, its predecessor (Allais & Hagen(l979», and elsewhere2