Decision Utility Theory: Back to von Neumann, Morgenstern, and Markowitz

Munich Personal RePEc Archive

Decision Utility Theory: Back to von Neumann, Morgenstern, and Markowitz

Kontek, Krzysztof

Artal Investments

1 December 2010

Online at https://mpra.ub.uni-muenchen.de/27141/

MPRA Paper No. 27141, posted 01 Dec 2010 15:19 UTC

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The Theory of Games and Economic Behavior ,,^, . BConsider three events, C, A, B, for which the order of the individual’s preferences is the one stated. Let p be a real number between 0 and 1, such that A is exactly equally desirable with combined event consisting of a chance of probability 1 % p for B and the remaining chance of probability p for C. Then we sug%

gest the use of p as a numerical estimate for the ratio of the preference of A over B to that of C

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4 $ )!$ *0 !Le comportement de l’homme rationnel devant le risque: critique des postu%

lats etaxiomes de l’école Américaine! 2 $ */0'*,I!

7 $ )! 3!$ , !Using contextual effects to derive psychophysical scales. U

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7 T $ 2!$ L ( $ L!$ 3 $ 5!$ //I ! The Priority Heuristic: Making Choices

Without Trade%Offs! 5 $ 0 $ ! ,/ ',0 !

L ( $ 5!$ : $ L!$ ! On the Shape of the Probability Weighting Function.

$ 01$ ' II!

< $ "!$ % $ 4!$ ! Prospect theory: An analysis of decisions under risk. 2 '

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< $ "!$ : %% $ !$ & $ 5!$ ! Back to Bentham? Explorations of Experienced

Utility! Q = 2 $ ) $ 0 *',/*!

< $ "!$ !Objective Happiness! 8 < $ "!$ " $ 2!$ & ($ +!

Well%Being. The Foundation of Hedonic Psychology! 5 & A $ 0' *!

< $ "!$ $ 5!$ //I ! Anomalies: Utility Maximization and Experienced Utility!

= 2 $ /$ + ! $ ' 0,!

) % ( 3!$ * !The Utility of Wealth.= 2 $ @ ! I/$ ! * ' *1!

5 $ "!$ //, ! Utility theory from Jeremy Bentham to Daniel Kahneman! : %

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& $ 3!$ 1 ! Theories of bounded rationality. 8 3! & $ Models of bounded rationality. Behavioral economics and business organization! $ )4$ )8 ! @ !

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% 4!$ < "!$ ! Advances in Prospect Theory: Cumulative Representation of

Uncertainty! = 5 % # $ ! * , $ M $ '0 0!

@ $ 7! )! &!$ A - $ !$ ! The Measurement of Welfare and Well%Being: The Ley%

den Approach! 8 < $ "!$ " $ 2!$ & ( +! $Well%Being. The Foundation of Hedonic Psychology! 5 & A $ , 0',00!

@ + =!$ ) M!$ ,, !The Theory of Games and Economic Behavior$ '

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: $ 2!$ , !From Subjective Probabilities to Decision Weights: The Effect of Asymmetric Loss Functions on the Evaluation of Uncertain Outcomes and Events. 7 $

@ ! *$ + $ 1' , !