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Expected utility without utility

  • Erio Castagnoli

    (Bocconi University, Italy)

  • Marco LiCalzi

    (University of Venice, Italy)

This paper advances an interpretation of Von Neumann–Morgenstern’s expected utility model for preferences over lotteries which does not require the notion of a cardinal utility over prizes and can be phrased entirely in the language of probability. According to it, the expected utility of a lottery can be read as the probability that this lottery outperforms another given independent lottery. The implications of this interpretation for some topics and models in decision theory are considered.

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File URL: http://128.118.178.162/eps/game/papers/0508/0508004.pdf
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Paper provided by EconWPA in its series Game Theory and Information with number 0508004.

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Length: 16 pages
Date of creation: 08 Aug 2005
Date of revision:
Handle: RePEc:wpa:wuwpga:0508004
Note: Type of Document - pdf; pages: 16
Contact details of provider: Web page: http://128.118.178.162

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  1. Bordley, Robert F, 1992. " An Intransitive Expectations-Based Bayesian Variant of Prospect Theory," Journal of Risk and Uncertainty, Springer, vol. 5(2), pages 127-44, May.
  2. Grandmont, Jean-Michel, 1972. "Continuity properties of a von Neumann-Morgenstern utility," Journal of Economic Theory, Elsevier, vol. 4(1), pages 45-57, February.
  3. Machina, Mark J, 1982. ""Expected Utility" Analysis without the Independence Axiom," Econometrica, Econometric Society, vol. 50(2), pages 277-323, March.
  4. Viscusi, W Kip, 1989. " Prospective Reference Theory: Toward an Explanation of the Paradoxes," Journal of Risk and Uncertainty, Springer, vol. 2(3), pages 235-63, September.
  5. Robson, Arthur J, 1992. "Status, the Distribution of Wealth, Private and Social Attitudes to Risk," Econometrica, Econometric Society, vol. 60(4), pages 837-57, July.
  6. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
  7. Arrow, Kenneth J, 1974. "The Use of Unbounded Utility Functions in Expected-Utility Maximization: Response," The Quarterly Journal of Economics, MIT Press, vol. 88(1), pages 136-38, February.
  8. Harry Markowitz, 1952. "The Utility of Wealth," Journal of Political Economy, University of Chicago Press, vol. 60, pages 151.
  9. Robert F. Bordley & Gordon Hazen, 1992. "Nonlinear Utility Models Arising from Unmodelled Small World Intercorrelations," Management Science, INFORMS, vol. 38(7), pages 1010-1017, July.
  10. Foldes, Lucien, 1972. "Expected Utility and Continuity," Review of Economic Studies, Wiley Blackwell, vol. 39(4), pages 407-21, October.
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