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Great Expectations. Part I: On the Customizability of Generalized Expected Utility

Listed author(s):
  • Francis C. Chu

    (Cornell University)

  • Joseph Y. Halpern

    (Cornell University)

Many different rules for decision making have been introduced in the literature. We present a single framework in which to study and compare these rules. This is done by defining expected utility with respect to general expectation structures, where a decision maker's beliefs are represented by plausibility measures and the decision maker's tastes are represented by general (i.e., not necessarily real-valued) utility functions. We call the resulting notion of expected utility generalized EU (GEU) and show that we can represent arbitrary preference relations on acts using GEU. We then show that each of Savage's postulates corresponds to an axiom on GEU. Thus, GEU can be customized to capture postulates of interest.

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File URL: http://econwpa.repec.org/eps/game/papers/0411/0411003.pdf
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Paper provided by EconWPA in its series Game Theory and Information with number 0411003.

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Length: 22 pages
Date of creation: 05 Nov 2004
Handle: RePEc:wpa:wuwpga:0411003
Note: Type of Document - pdf; pages: 22. A preliminary version appears in PRoceedings of the 18th International Joint Conference on AI, 2003, pp. 291-296
Contact details of provider: Web page: http://econwpa.repec.org

References listed on IDEAS
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  1. Itzhak Gilboa & David Schmeidler, 1989. "Maxmin Expected Utility with Non-Unique Prior," Post-Print hal-00753237, HAL.
  2. Yaari, Menahem E, 1987. "The Dual Theory of Choice under Risk," Econometrica, Econometric Society, vol. 55(1), pages 95-115, January.
  3. Schmeidler, David, 1989. "Subjective Probability and Expected Utility without Additivity," Econometrica, Econometric Society, vol. 57(3), pages 571-587, May.
  4. Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
  5. Wakker, Peter & Tversky, Amos, 1993. "An Axiomatization of Cumulative Prospect Theory," Journal of Risk and Uncertainty, Springer, vol. 7(2), pages 147-175, October.
  6. Francis C. Chu & Joseph Y. Halpern, 2004. "Great expectations. Part II: Generalized expected utility as a universal decision rule," Game Theory and Information 0411004, EconWPA.
  7. Fishburn, Peter C, 1987. "Reconsiderations in the Foundations of Decision under Uncertainty," Economic Journal, Royal Economic Society, vol. 97(388), pages 825-841, December.
  8. Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
  9. Gul, Faruk, 1991. "A Theory of Disappointment Aversion," Econometrica, Econometric Society, vol. 59(3), pages 667-686, May.
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