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A derivation of expected utility maximization in the context of a game

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  • Gilboa, Itzhak
  • Schmeidler, David

Abstract

A decision maker faces a decision problem, or a game against nature. For each probability distribution over the state of the world (nature's strategies), she has a weak order over her acts (pure strategies). We formulate conditions on these weak orders guaranteeing that they can be jointly represented by expected utility maximization with respect to an almost-unique state-dependent utility, that is, a matrix assigning real numbers to act-state pairs. As opposed to a utility function that is derived in another context, the utility matrix derived in the game will incorporate all psychological or sociological determinants of well-being that result from the very fact that the outcomes are obtained in a given game.
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  • Gilboa, Itzhak & Schmeidler, David, 2003. "A derivation of expected utility maximization in the context of a game," Games and Economic Behavior, Elsevier, vol. 44(1), pages 172-182, July.
  • Handle: RePEc:eee:gamebe:v:44:y:2003:i:1:p:172-182
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    Cited by:

    1. Azrieli, Yaron, 2011. "Axioms for Euclidean preferences with a valence dimension," Journal of Mathematical Economics, Elsevier, vol. 47(4-5), pages 545-553.
    2. O'Callaghan, Patrick, 2016. "Parametric continuity from preferences when the topology is weak and actions are discrete," MPRA Paper 72356, University Library of Munich, Germany.
    3. O'Callaghan, Patrick, 2016. "Minimal conditions for parametric continuity and stable policy in extreme settings," MPRA Paper 70989, University Library of Munich, Germany.
    4. O'Callaghan, Patrick, 2013. "Ordinal, nonlinear context dependence," Risk and Sustainable Management Group Working Papers 152450, University of Queensland, School of Economics.
    5. Castillo, Marco E. & Cross, Philip J., 2008. "Of mice and men: Within gender variation in strategic behavior," Games and Economic Behavior, Elsevier, vol. 64(2), pages 421-432, November.
    6. Grant, Simon & Meneghel, Idione & Tourky, Rabee, 2016. "Savage games," Theoretical Economics, Econometric Society, vol. 11(2), May.
    7. repec:eee:mateco:v:72:y:2017:i:c:p:88-94 is not listed on IDEAS
    8. O’Callaghan, Patrick, 2011. "Context and Decision: Utility on a Union of Mixture Spaces," The Warwick Economics Research Paper Series (TWERPS) 973, University of Warwick, Department of Economics.
    9. Chambers, Christopher P. & Hayashi, Takashi, 2012. "Choice and individual welfare," Journal of Economic Theory, Elsevier, vol. 147(5), pages 1818-1849.

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    JEL classification:

    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General

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