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Expected Utility and Cognitive Consistency

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  • Levy-Garboua, L.

Abstract

One may reason before making a decision on perceiving potential objections to expected utility-preference. Cognitive consistency is attained by making full use of available information, i.e. consistent preference and reasons. I show that coincidence between the rational choice and the normative preference requires perfect consciousness, and I provide maximizing rules of decision conditional on preference which are valid with imperfect consciousness. A necessary and sufficient condition for expected utility to be descriptively valid is given. Under risk, the rational choice converges towards expected utility through unconscious learning. Many well-known paradoxes and anomalies of choice, evaluation and information are solved for well-behaved preferences.

Suggested Citation

  • Levy-Garboua, L., 1999. "Expected Utility and Cognitive Consistency," Papiers d'Economie Mathématique et Applications 1999.104, Université Panthéon-Sorbonne (Paris 1).
  • Handle: RePEc:fth:pariem:1999.104
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    References listed on IDEAS

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    1. Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
    2. John D. Hey & Chris Orme, 2018. "Investigating Generalizations Of Expected Utility Theory Using Experimental Data," World Scientific Book Chapters, in: Experiments in Economics Decision Making and Markets, chapter 3, pages 63-98, World Scientific Publishing Co. Pte. Ltd..
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    Cited by:

    1. André Lapidus, 2000. "La rationalité du choix passionnel : En quête de l'héritage de David Hume," Post-Print hal-00343939, HAL.
    2. Serge Blondel, 2002. "Testing Theories of Choice Under Risk: Estimation of Individual Functionals," Journal of Risk and Uncertainty, Springer, vol. 24(3), pages 251-265, May.

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    More about this item

    Keywords

    INFORMATION ; BEHAVIOUR ; RISK;
    All these keywords.

    JEL classification:

    • D0 - Microeconomics - - General
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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