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From Outcomes to Acts: A Non-Standard Axiomatization of the Expected Utility Principle
KTH, Superseded Departments, Infrastructure.
2004 (English)In: Journal of Philosophical Logic, ISSN 0022-3611, E-ISSN 1573-0433, Vol. 33, no 4, 361-378 p.Article in journal (Refereed) Published
Abstract [en]

This paper presents an axiomatization of the principle of maximizing expected utility that does not rely on the independence axiom or sure-thing principle. Perhaps more importantly the new axiomatization is based on an ex ante approach, instead of the standard ex post approach. An ex post approach utilizes the decision maker's preferences among risky acts for generating a utility and a probability function, whereas in the ex ante approach a set of preferences among potential outcomes are on the input side of the theory and the decision maker's preferences among risky acts on the output side.

Place, publisher, year, edition, pages
2004. Vol. 33, no 4, 361-378 p.
Keyword [en]
ex ante, ex post, expected utility, Savage, von Neumann, Morgenstern
National Category
Philosophy
Identifiers
URN: urn:nbn:se:kth:diva-13600DOI: 10.1023/B:LOGI.0000036852.81010.dbISI: 000223705700002Scopus ID: 2-s2.0-70949101449OAI: oai:DiVA.org:kth-13600DiVA: diva2:326158
Note
QC 20100622 QC 20110926Available from: 2010-06-22 Created: 2010-06-22 Last updated: 2017-12-12Bibliographically approved
In thesis
1. Transformative Decision Rules: Foundations and Applications
Open this publication in new window or tab >>Transformative Decision Rules: Foundations and Applications
2003 (English)Doctoral thesis, comprehensive summary (Other scientific)
Abstract [en]

A transformative decision rule alters the representation of a decisionproblem, either by changing the sets of acts and states taken intoconsideration, or by modifying the probability or value assignments.Examples of decision rules belonging to this class are the principleof insufficient reason, Isaac Levi’s condition of E-admissibility, Luceand Raiffa’s merger of states-rule, and the de minimis principle. Inthis doctoral thesis transformative decision rules are analyzed froma foundational point of view, and applied to two decision theoreticalproblems: (i) How should a rational decision maker model a decisionproblem in a formal representation (‘problem specification’, ‘formaldescription’)? (ii) What role can transformative decision rules play inthe justification of the principle of maximizing expected utility?The thesis consists of a summary and seven papers. In Papers Iand II certain foundational issues concerning transformative decisionrules are investigated, and a number of formal properties of this classof rules are proved: convergence, iterativity, and permutability. InPaper III it is argued that there is in general no unique representationof a decision problem that is strictly better than all alternative representations.In Paper IV it is shown that the principle of maximizingexpected utility can be decomposed into a sequence of transformativedecision rules. A set of axioms is proposed that together justify theprinciple of maximizing expected utility. It is shown that the suggestedaxiomatization provides a resolution of Allais’ paradox that cannot beobtained by Savage-style, nor by von Neumann and Morgenstern-styleaxiomatizations. In Paper V the axiomatization from Paper IV is furtherelaborated, and compared to the axiomatizations proposed byvon Neumann and Morgenstern, and Savage. The main results in PaperVI are two impossibility theorems for catastrophe averse decisionrules, demonstrating that given a few reasonable desiderata for suchrules, there is no rule that can fulfill the proposed desiderata. In PaperVII transformative decision rules are applied to extreme risks, i.e.to a potential outcome of an act for which the probability is low, butwhose (negative) value is high.

Place, publisher, year, edition, pages
Stockholm: KTH Royal Institute of Technology, 2003. x, 72 p.
Series
Theses in philosophy from the Royal Institute of Technology, ISSN 1650-8831 ; 3
Keyword
transformative decision rule, problem specification, framing, expected utility, decision theory
National Category
Philosophy
Identifiers
urn:nbn:se:kth:diva-3512 (URN)91-7283-460-9 (ISBN)
Public defence
2003-05-16, 00:00
Note

QC 20100622

Available from: 2003-05-12 Created: 2003-05-12 Last updated: 2017-01-18Bibliographically approved

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