A Derivation of Expected Utility Maximization in the Context of a Game

Itzhak Gilboa and David Schmeidler

No 1342, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: A decision maker faces a decision problem, or a game against nature. For each probability distribution over the state of the world (nature's strategies), she has a weak order over her acts (pure strategies). We formulate conditions on these weak orders guaranteeing that they can be jointly represented by expected utility maximization with respect to an almost-unique state-dependent utility, that is, a matrix assigning real numbers to act-state pairs. As opposed to a utility function that is derived in another context, the utility matrix derived in the game will incorporate all psychological or sociological determinants of well-being that result from the very fact that the outcomes are obtained in a given game.

Keywords: Expected utility; ultimatum game (search for similar items in EconPapers)
JEL-codes: D70 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2001-12
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Published in Games and Economic Behavior (July 2003), 44(1): 172-182

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Journal Article: A derivation of expected utility maximization in the context of a game (2003)
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