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A Quantum-Conceptual Explanation of Violations of Expected Utility in Economics

Author

Listed:
  • Aerts, Diederik
  • Broekaert, Jan
  • Czachor, Marek
  • D'Hooghe, Bart

Abstract

The expected utility hypothesis is one of the building blocks of classical economic theory and founded on Savage's Sure-Thing Principle. It has been put forward, e.g. by situations such as the Allais and Ellsberg paradoxes, that real-life situations can violate Savage's Sure-Thing Principle and hence also expected utility. We analyze how this violation is connected to the presence of the 'disjunction effect'' of decision theory and use our earlier study of this effect in concept theory to put forward an explanation of the violation of Savage's Sure-Thing Principle, namely the presence of 'quantum conceptual thought' next to 'classical logical thought' within a double layer structure of human thought during the decision process. Quantum conceptual thought can be modeled mathematically by the quantum mechanical formalism, which we illustrate by modeling the Hawaii problem situation, a well-known example of the disjunction effect, and we show how the dynamics in the Hawaii problem situation is generated by the whole conceptual landscape surrounding the decision situation.

Suggested Citation

  • Aerts, Diederik & Broekaert, Jan & Czachor, Marek & D'Hooghe, Bart, 2011. "A Quantum-Conceptual Explanation of Violations of Expected Utility in Economics," MPRA Paper 41792, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:41792
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    References listed on IDEAS

    as
    1. Daniel Ellsberg, 2000. "Risk, Ambiguity and the Savage Axioms," Levine's Working Paper Archive 7605, David K. Levine.
    2. Daniel Ellsberg, 1961. "Risk, Ambiguity, and the Savage Axioms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 75(4), pages 643-669.
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    Cited by:

    1. Ismaël Rafaï & Sébastien Duchêne & Eric Guerci & Irina Basieva & Andrei Khrennikov, 2022. "The triple-store experiment: a first simultaneous test of classical and quantum probabilities in choice over menus," Theory and Decision, Springer, vol. 92(2), pages 387-406, March.
    2. Ashtiani, Mehrdad & Azgomi, Mohammad Abdollahi, 2015. "A survey of quantum-like approaches to decision making and cognition," Mathematical Social Sciences, Elsevier, vol. 75(C), pages 49-80.
    3. Boyer-Kassem, Thomas & Duchêne, Sébastien & Guerci, Eric, 2016. "Testing quantum-like models of judgment for question order effect," Mathematical Social Sciences, Elsevier, vol. 80(C), pages 33-46.
    4. Luke Snow & Shashwat Jain & Vikram Krishnamurthy, 2022. "Lyapunov based Stochastic Stability of Human-Machine Interaction: A Quantum Decision System Approach," Papers 2204.00059, arXiv.org.
    5. Dino Borie, 2013. "Expected utility theory with non-commutative probability theory," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 8(2), pages 295-315, October.
    6. Thomas Boyer-Kassem & Sébastien Duchêne & Eric Guerci, 2016. "Quantum-like models cannot account for the conjunction fallacy," Theory and Decision, Springer, vol. 81(4), pages 479-510, November.
    7. Mehrdad Ashtiani & Mohammad Abdollahi Azgomi, 2016. "A formulation of computational trust based on quantum decision theory," Information Systems Frontiers, Springer, vol. 18(4), pages 735-764, August.

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    JEL classification:

    • B40 - Schools of Economic Thought and Methodology - - Economic Methodology - - - General
    • C00 - Mathematical and Quantitative Methods - - General - - - General
    • A10 - General Economics and Teaching - - General Economics - - - General
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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