CHOICE IN RISK AND CERTAINTY EFFECT - A G ENERAL AXIOMATIC MODEL

Due to the inability of the classical model of von Neumann and Morgens tern to take into account the certainty effect, Jaffray has developed a model of rational behavior under objectively probabilized uncertaint y. However, the latter model only covers the case of lotteries (probab ility distributions of finite support). In this paper, we propose a ge neralisation of this model to the case of arbitrary probability distri butions, based on four axioms having a precise mathematical content an d interpretation. We show that choices are partially determined by an arbitration between the level of security and the expected utility.