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Expected utility without utility

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Author Info
Erio Castagnoli (Bocconi University, Italy)
Marco LiCalzi (University of Venice, Italy)

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Abstract

This paper advances an interpretation of Von Neumann–Morgenstern’s expected utility model for preferences over lotteries which does not require the notion of a cardinal utility over prizes and can be phrased entirely in the language of probability. According to it, the expected utility of a lottery can be read as the probability that this lottery outperforms another given independent lottery. The implications of this interpretation for some topics and models in decision theory are considered.

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File URL: http://129.3.20.41/eps/game/papers/0508/0508004.pdf
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Publisher Info
Paper provided by EconWPA in its series Game Theory and Information with number 0508004.

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Length: 16 pages
Date of creation: 08 Aug 2005
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Handle: RePEc:wpa:wuwpga:0508004

Note: Type of Document - pdf; pages: 16
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Web page: http://129.3.20.41

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Related research
Keywords: expected utility cardinal utility benchmark risk attitude stochastic dominance

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Find related papers by JEL classification:
C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Machina, Mark J, 1982. ""Expected Utility" Analysis without the Independence Axiom," Econometrica, Econometric Society, vol. 50(2), pages 277-323, March. [Downloadable!] (restricted)
  2. Grandmont, Jean-Michel, 1972. "Continuity properties of a von Neumann-Morgenstern utility," Journal of Economic Theory, Elsevier, vol. 4(1), pages 45-57, February. [Downloadable!] (restricted)
  3. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March. [Downloadable!] (restricted)
  4. Foldes, Lucien, 1972. "Expected Utility and Continuity," Review of Economic Studies, Blackwell Publishing, vol. 39(4), pages 407-21, October. [Downloadable!] (restricted)
  5. Arrow, Kenneth J, 1974. "The Use of Unbounded Utility Functions in Expected-Utility Maximization: Response," The Quarterly Journal of Economics, MIT Press, vol. 88(1), pages 136-38, February. [Downloadable!] (restricted)
  6. Robson, Arthur J, 1992. "Status, the Distribution of Wealth, Private and Social Attitudes to Risk," Econometrica, Econometric Society, vol. 60(4), pages 837-57, July. [Downloadable!] (restricted)
  7. Bordley, Robert F, 1992. " An Intransitive Expectations-Based Bayesian Variant of Prospect Theory," Journal of Risk and Uncertainty, Springer, vol. 5(2), pages 127-44, May.
  8. Harry Markowitz, 1952. "The Utility of Wealth," Journal of Political Economy, University of Chicago Press, vol. 60, pages 151. [Downloadable!] (restricted)
  9. Viscusi, W Kip, 1989. " Prospective Reference Theory: Toward an Explanation of the Paradoxes," Journal of Risk and Uncertainty, Springer, vol. 2(3), pages 235-63, September.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Marco LiCalzi & Annamaria Sorato, 2003. "The Pearson system of utility functions," Game Theory and Information 0311002, EconWPA. [Downloadable!]
    Other versions:
  2. Erio Castagnoli & Marco LiCalzi, 2005. "Benchmarking real-valued acts," Microeconomics 0502001, EconWPA. [Downloadable!]
    Other versions:
  3. Ali Abbas, 2004. "Maximum Entropy Utility," Game Theory and Information 0403002, EconWPA. [Downloadable!]
  4. Abbas, 2004. "Utility Probability Duality," General Economics and Teaching 0403001, EconWPA. [Downloadable!]
  5. Marco LiCalzi, 2005. "A language for the construction of preferences under uncertainty," Game Theory and Information 0509002, EconWPA. [Downloadable!]
  6. Sergiy Gerasymchuk, 2007. "Mean-Variance Portfolio Selection with Reference Dependent Preferences," Working Papers 150, Department of Applied Mathematics, University of Venice. [Downloadable!]
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