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Expected utility without utility

Author

Listed:
  • Erio Castagnoli

    (Bocconi University, Italy)

  • Marco LiCalzi

    (University of Venice, Italy)

Abstract

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.

Suggested Citation

  • Erio Castagnoli & Marco LiCalzi, 2005. "Expected utility without utility," Game Theory and Information 0508004, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpga:0508004
    Note: Type of Document - pdf; pages: 16
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/game/papers/0508/0508004.pdf
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    References listed on IDEAS

    as
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    6. Grandmont, Jean-Michel, 1972. "Continuity properties of a von Neumann-Morgenstern utility," Journal of Economic Theory, Elsevier, vol. 4(1), pages 45-57, February.
    7. Machina, Mark J, 1982. ""Expected Utility" Analysis without the Independence Axiom," Econometrica, Econometric Society, vol. 50(2), pages 277-323, March.
    8. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
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    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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