Which of the following statements describes the substitutability axiom?
A) The probabilities of two gambles can be interchanged if they are related to each other.
B) All sorts of gambles can be interchanged without value exchanges.
C) Gambles that have prizes about which people are indifferent are interchangeable.
D) If x is preferred to y, then x must be preferred to any probability mixture of x and y.

Question

Quizplus · Accepted Answer

The substitutability axiom states that if a person is indifferent between two outcomes or prizes, then they should be indifferent between any gambles that involve those outcomes. This means that the gambles are substitutable for one another in the eyes of the decision-maker if the outcomes involved are viewed as equivalent.

Which of the Following Statements Describes the Substitutability Axiom