A Derivation of Expected Utility Maximization in the Context of a Game
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.
|Date of creation:||Dec 2001|
|Publication status:||Published in Games and Economic Behavior (July 2003), 44(1): 172-182|
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