An Outcome-Oriented Theory of Choice and Empirical Paradoxes in Expected Utility Theory

Fumihiro Kaneko

Working Papers from Economic Growth Center, Yale University

Abstract: I analyze observed choice between lotteries from an outcome-oriented point of view in the framework of choice between random variables. I characterize a choice maker, who faces a choice situation between lotteries, by (1) a surmising process that associates, with a pair of lotteries, a set of well-defined choice situations between random variables, and (2) a choice set that is a collection of well-defined choice situations. I give a partial axiomatic foundation of the theory. The theory is applied to explain the well-known paradoxes in expected utility theory.

Keywords: Keywords: Expected Utility Theory; SSA Representation; SSB Representation; Prospect Theory; Choice under Uncertainty (search for similar items in EconPapers)
Pages: 66 pages
Date: 1997-05
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Persistent link: https://EconPapers.repec.org/RePEc:egc:wpaper:774

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