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DanielLC comments on Stupid Questions Open Thread Round 4 - Less Wrong Discussion

6 Post author: lukeprog 27 August 2012 12:04AM

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Comment author: DanielLC 27 August 2012 05:01:57AM 5 points [-]

I don't understand what you mean. Can you give me an example of preferences that are intransitive but not cyclic?

Comment author: Unnamed 27 August 2012 06:42:22AM 7 points [-]

A little bit of googling turned up this paper by Gustafsson (2010) on the topic, which says that indifference allows for intransitive preferences that do not create a strict cycle. For instance, A>B, B>C, and C=A.

The obvious solution is to add epsilon to break the indifference. If A>B, then there exists e>0 such that A>B+e. And if e>0 and C=A, then C+e>A. So A>B+e, B+e>C+e, and C+e>A, which gives you a strict cycle that allows for money pumping. Gustafsson calls this the small-bonus approach.

Gustafsson suggests an alternative, using lotteries and applying the principle of dominance. Consider the 4 lotteries:

Lottery 1: heads you get A, tails you get B
Lottery 2: heads you get A, tails you get C
Lottery 3: heads you get B, tails you get A
Lottery 4: heads you get C, tails you get A

Lottery 1 > Lottery 2, because if it comes up tails you prefer Lottery 1 (B>C) and if it comes up heads you are indifferent (A=A).
Lottery 2 > Lottery 3, because if it comes up heads you prefer Lottery 2 (A>B) and if it comes up tails you are indifferent (C=A)
Lottery 3 > Lottery 4, because if it comes up heads you prefer Lottery 3 (B>C) and if it comes up tails you are indifferent (A=A)
Lottery 4 > Lottery 1, because if it comes up tails you prefer Lottery 4 (A>B) and if it comes up heads you are indifferent (C=A)

Comment author: lukeprog 27 August 2012 05:48:34PM 3 points [-]

This is the kind of thing I was looking for; thanks!