Economics and Philosophy

Essays

The Common Prior Assumption in Economic Theory

Stephen Morrisa1

a1 University of Pennsylvania

Abstract

Why is (it that) common priors are implicit or explicit in the vast majority of the differential information literature in economics and game theory? Why has the economic community been unwilling, in practice, to accept and actually use the idea of truly personal probabilities in much the same way that it did accept the idea of personal utility functions? After all, in (Savage's expected utility theory), both the utilities and probabilities are derived separately for each decision maker. Why were the utilities accepted as personal, and the probabilities not?