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A Conditional Expected Utility Model for Myopic Decision Makers

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  • Tesfatsion, Leigh S.

Abstract

This article formulates and axiomatizes a conditional expected utility model that allows a decision maker to specify his actions in the form of partial rather than complete contingency plans and to simultaneously choose goals and actions in end-mean pairs. Both utility and probability are conditioned on selected goals and actions (g,a), and both are defined over the same set of possible (g,a)-conditioned events. For adaptive sequential decision problems, this symmetrical treatment of utility and probability permits agents to learn via "criterion filtering." That is, the expected utility criterion function can be directly updated in each decision period via transitional utility assessments in a manner analogous to Bayes' rule for updating probability distributions via transitional probability assessments. Annotated pointers to related work can be accessed here: http://www2.econ.iastate.edu/tesfatsi/cfhome.htm

Suggested Citation

  • Tesfatsion, Leigh S., 1980. "A Conditional Expected Utility Model for Myopic Decision Makers," Staff General Research Papers Archive 11225, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genres:11225
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    More about this item

    Keywords

    behavioral economics; Bounded rationality; goals; Bayes' rule; criterion filtering;
    All these keywords.

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

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