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Decision under risk : The classical Expected Utility model

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  • Alain Chateauneuf

    () (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)

  • Michèle Cohen

    () (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)

  • Jean-Marc Tallon

    () (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)

Abstract

This chapter of a collective book aims at presenting the basics of decision making under risk. We first define notions of risk and increasing risk and recall definitions and classifications (that are valid independently of any representation) of behavior under risk. We then review the classical model of expected utility due to von Neumann and Morgenstern andd its main properties. Issues raised by this model are then discussed and two models generalizing the expected utility model are briefly discussed.

Suggested Citation

  • Alain Chateauneuf & Michèle Cohen & Jean-Marc Tallon, 2008. "Decision under risk : The classical Expected Utility model," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00348814, HAL.
  • Handle: RePEc:hal:cesptp:halshs-00348814
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00348814
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    Keywords

    Allais paradox; Risque; aversion pour le risque; espérance d'utilité; von Neumann et Morgenstern; paradoxe d'Allais.; Risk; risk aversion; expected utility; von Neumann and Morgenstern; Allais paradox.;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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