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Decision under risk: The classical Expected Utility model



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

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  • Alain Chateauneuf & Michèle Cohen & Jean-Marc Tallon, 2008. "Decision under risk: The classical Expected Utility model," Documents de travail du Centre d'Economie de la Sorbonne v08085, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  • Handle: RePEc:mse:cesdoc:v08085

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    Risk; risk aversion; expected utility; von Neumann et Morgenstern; Allais Paradox;

    JEL classification:

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


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