A Quantum-Conceptual Explanation of Violations of Expected Utility in Economics
Diederik Aerts (),
Marek Czachor and
MPRA Paper from University Library of Munich, Germany
The expected utility hypothesis is one of the building blocks of classical economic theory and founded on Savage's Sure-Thing Principle. It has been put forward, e.g. by situations such as the Allais and Ellsberg paradoxes, that real-life situations can violate Savage's Sure-Thing Principle and hence also expected utility. We analyze how this violation is connected to the presence of the 'disjunction effect'' of decision theory and use our earlier study of this effect in concept theory to put forward an explanation of the violation of Savage's Sure-Thing Principle, namely the presence of 'quantum conceptual thought' next to 'classical logical thought' within a double layer structure of human thought during the decision process. Quantum conceptual thought can be modeled mathematically by the quantum mechanical formalism, which we illustrate by modeling the Hawaii problem situation, a well-known example of the disjunction effect, and we show how the dynamics in the Hawaii problem situation is generated by the whole conceptual landscape surrounding the decision situation.
Keywords: Expected Utility; Sure-Thing Principle; Quantum modeling; disjunction effect; Ellsberg paradox (search for similar items in EconPapers)
JEL-codes: A10 B40 C00 D80 (search for similar items in EconPapers)
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Published in Lecture Notes in Computer Science 7052.7052(2011): pp. 192-198
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:41792
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