Expected qualitative utility maximization

DOI10.1006/GAME.1998.0787MaRDI QIDQ5938621zbMATH OpenOpenAlexFDO

Authors Daniel Lehmann

Publication date 22 September 2002

Published in Games and Economic Behavior (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/cs/0202023

zbMATH Keywords

decision theoryindividual preferencesnon-standard utilitiesutility function

Mathematics Subject Classification ID

Fundamental topics (basic mathematics, methodology; applicable to economics in general) (91B02) Decision theory (91B06) Utility theory (91B16)

Abstract: A model for decision making that generalizes Expected Utility Maximization is presented. This model, Expected Qualitative Utility Maximization, encompasses the Maximin criterion. It relaxes both the Independence and the Continuity postulates. Its main ingredient is the definition of a qualitative order on nonstandard models of the real numbers and the consideration of nonstandard utilities. Expected Qualitative Utility Maximization is characterized by an original weakening of von Neumann-Morgenstern's postulates. Subjective probabilities may be defined from those weakened postulates, as Anscombe and Aumann did from the original postulates. Subjective probabilities are numbers, not matrices as in the Subjective Expected Lexicographic Utility approach. JEL no.: D81 Keywords: Utility Theory, Non-Standard Utilities, Qualitative Decision Theory

Review text

The author presents a new axiomatic of individual preferences for decision making under risk that is an alternative to the classical Neumann-Morgenstern (NM) one. It is destined for situations when each of compared lotteries consists of two situations and one of them is overwhelmingly preferable to another. If the main situations of lotteries are deemed as equal, the alternatives will be judged as equal even if they are mixed with different overwhelmed (insignificant) effects which are not be judged as equal ones. This contradicts the NM independence axiom. Another contradiction concerns to the NM continuity axiom. NEWLINENEWLINENEWLINEThe main notion of the new theory is a qualitative order on nonstandard models of the real numbers which is represented by ``nonstandard utilities. Probabilities of lotteries are standard numbers and subjective ones. The main result of the paper is a theorem of the representation of the qualitative order by a linear nonstandard utility function. Comparison with the lexicographic subjective expected utility theory is done.

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Cited in

(19)

• Elementary non-Archimedean utility theory
• Projective expected utility
• Divergent mathematical treatments in utility theory
• Conditional expected utility
• Do people maximize quantiles?
• Acceptability maximization
• Computer science and decision theory
• Quantile Maximization in Decision Theory*
• A GROUP GAME OF MULTIPLE ATTRIBUTE DECISION MAKING
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• Qualitative decision theory with preference relations and comparative uncertainty: an axiomatic approach
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