Network approach for decision making under risk—How do we choose among probabilistic options with the same expected value?

Wei Pan and Yi-Shin Chen

PLOS ONE, 2018, vol. 13, issue 4, 1-19

Abstract: Conventional decision theory suggests that under risk, people choose option(s) by maximizing the expected utility. However, theories deal ambiguously with different options that have the same expected utility. A network approach is proposed by introducing ‘goal’ and ‘time’ factors to reduce the ambiguity in strategies for calculating the time-dependent probability of reaching a goal. As such, a mathematical foundation that explains the irrational behavior of choosing an option with a lower expected utility is revealed, which could imply that humans possess rationality in foresight.

Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:plo:pone00:0196060

DOI: 10.1371/journal.pone.0196060

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