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Foundations of Rational Choice Under Risk

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  • Anand, Paul

Abstract

In this book, Paul Anand examines the normative interpretation of Subjective Expected Utility (SEU). He tests the philosophical and logical basis for associating SEU with rational choice. Decision theorists have increasingly come to accept the experimental evidence that subjects systematically violate the axiomatic assumptions of SEU, and as a result the past decade has witnessed an explosion of mathematical models that seek to capture this behaviour. A current issue is whether axioms of SEU really are canons of rationality. Anand discusses whether the new decision-theoretic models are more than just accounts of irrational behaviour. The main themes of the book are that, empirically, SEU is false, and that normatively it imposes unnecessary constraints on rational agency. Problems with Bayesianism are introduced and it is shown that useful distinctions between risk and uncertainty (in a Keynesian sense) can be made. Some of the radical methodological changes in economics that underpin theoretical developments in decision theory and economics are also discussed.

Suggested Citation

  • Anand, Paul, 1995. "Foundations of Rational Choice Under Risk," OUP Catalogue, Oxford University Press, number 9780198774426.
  • Handle: RePEc:oxp:obooks:9780198774426
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    Citations

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    Cited by:

    1. Marc-Arthur Diaye & Michal Wong-Urdanivia, 2005. "A simple test of Richter-rationality," Cahiers de la Maison des Sciences Economiques b06008, Université Panthéon-Sorbonne (Paris 1).
    2. repec:wsi:ijtafx:v:15:y:2012:i:02:n:s0219024912500173 is not listed on IDEAS
    3. Mandler, Michael, 2005. "Incomplete preferences and rational intransitivity of choice," Games and Economic Behavior, Elsevier, vol. 50(2), pages 255-277, February.
    4. Khalil, Elias, 2004. "Integrity, Shame and Self-Rationalization," Vassar College Department of Economics Working Paper Series 55, Vassar College Department of Economics.
    5. Marc-Arthur Diaye & Michal Wong-Urdanivia, 2006. "A Simple Test of Richter-Rationality," Documents de recherche 06-01, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
    6. Soldatos, Gerasimos T., 1995. "Why People Tolerate Underground Economy and Tax Evasion?," MPRA Paper 58545, University Library of Munich, Germany.
    7. S. Abu Turab Rizvi, 2001. "Preference Formation and the Axioms of Choice," Review of Political Economy, Taylor & Francis Journals, vol. 13(2), pages 141-159.
    8. Luca Zarri, 2010. "On social utility payoffs in games: a methodological comparison between Behavioural and Rational Game Theory," Theory and Decision, Springer, vol. 69(4), pages 587-598, October.
    9. Heidelbach, Olaf, 2007. "Efficiency of selected risk management instruments: An empirical analysis of risk reduction in Kazakhstani crop production," Studies on the Agricultural and Food Sector in Transition Economies, Leibniz Institute of Agricultural Development in Transition Economies (IAMO), volume 40, number 92323.
    10. Mandeep K. Dhami & David R. Mandel, 2013. "How do defendants choose their trial court? Evidence for a heuristic processing account," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 8(5), pages 552-560, September.
    11. Nadja Silberhorn & Lutz Hildebrandt, 2012. "Does umbrella branding really work? Investigating cross-category brand loyalty," SFB 649 Discussion Papers SFB649DP2012-028, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.

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