A theory of choice under uncertainty is proposed which removes the completeness assumption from the Anscombe–Aumann formulation
of Savage's theory and introduces an inertia assumption. The inertia assumption is that there is such a thing as the
status quo and an alternative is accepted only if it is preferred to the
status quo. This theory is one way of giving rigorous expression to Frank Knight's distinction between risk and uncertainty.
Mathematics Subject Classification (2000): 91B06
Journal of Economic Literature Classification: D81
Received: 8 October 2001 / Accepted: 8 November 2001
The author is grateful to Martin Shubik for encouragement and long discussions. He is also grateful to Donald Brown, Edward
Leamer, David Schmeidler, Martin Shubik, Sidney Winter, Asad Zaman and Arnold Zellner for calling his attention to relevant
literature.
Note of the Editor: Except for a few minor editorial changes, this article publishes content formerly circulated as Discussion Paper no.~807
of the Cowles Foundation at Yale University, November 1986.