Expected Utility and Cognitive Consistency
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.
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|Date of creation:||1999|
|Contact details of provider:|| Postal: France; Universite de Paris I - Pantheon- Sorbonne, 12 Place de Pantheon-75005 Paris, France|
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- Milton Friedman & L. J. Savage, 1948. "The Utility Analysis of Choices Involving Risk," Journal of Political Economy, University of Chicago Press, vol. 56, pages 279-279.
- Machina, Mark J, 1987. "Choice under Uncertainty: Problems Solved and Unsolved," Journal of Economic Perspectives, American Economic Association, vol. 1(1), pages 121-154, Summer.
- Camerer, Colin F, 1989. "An Experimental Test of Several Generalized Utility Theories," Journal of Risk and Uncertainty, Springer, vol. 2(1), pages 61-104, April.
- Battalio, Raymond C & Kagel, John H & Jiranyakul, Komain, 1990. "Testing between Alternative Models of Choice under Uncertainty: Some Initial Results," Journal of Risk and Uncertainty, Springer, vol. 3(1), pages 25-50, March. Full references (including those not matched with items on IDEAS)
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