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Expected Utility Illustrated: A Graphical Analysis of Gambles with More than Two Possible Outcomes

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  • Frederick H. Chen

Abstract

The author presents a simple geometric method to graphically illustrate the expected utility from a gamble with more than two possible outcomes. This geometric result gives economics students a simple visual aid for studying expected utility theory and enables them to analyze a richer set of decision problems under uncertainty compared to what they typically see in an intermediate-level microeconomics course.

Suggested Citation

  • Frederick H. Chen, 2010. "Expected Utility Illustrated: A Graphical Analysis of Gambles with More than Two Possible Outcomes," The Journal of Economic Education, Taylor & Francis Journals, vol. 41(1), pages 63-70, January.
  • Handle: RePEc:taf:jeduce:v:41:y:2010:i:1:p:63-70 DOI: 10.1080/00220480903382214
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    References listed on IDEAS

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    1. Ernst Fehr & Simon Gächter, 2000. "Fairness and Retaliation: The Economics of Reciprocity," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 159-181, Summer.
    2. Manfred K÷nigstein, 2001. "Optimal Contracting With Boundedly Rational Agents," Homo Oeconomicus, Institute of SocioEconomics, vol. 18, pages 211-228.
    3. Vital Anderhub & Simon Gächter & Manfred Königstein, 2002. "Efficient Contracting and Fair Play in a Simple Principal-Agent Experiment," Experimental Economics, Springer;Economic Science Association, vol. 5(1), pages 5-27, June.
    4. Colin F. Camerer & Richard H. Thaler, 1995. "Anomalies: Ultimatums, Dictators and Manners," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 209-219, Spring.
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    Cited by:

    1. Michael Brooks, 2015. "Analytic conservatism and analytic radicalism: Of understated distinctions and other analytical things," Constitutional Political Economy, Springer, pages 442-454.

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