"Making Book against Oneself," the Independence Axiom, and Nonlinear Utility Theory.

An individual with known preferences over lotteries can be led to accept random wealth distributions different from his initi al endowment by a sequential process in which some uncertainty is res olved and he is offered a new lottery in place of the remaining uncer tainty. This paper examines the restrictions that can be placed on an individual's preferences by axioms that stipulate that such a proces s not be able to generate a new wealth distribution that is prima fac ie inferior to the original. The relationship of these axioms to the independence axiom of von Neumann and Morgenstern and to the quasicon vexity of preferences in the wealth distribution are explored. Copyright 1987, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.