1990•Palgrave Macmillan UK eBooksRequires access

Expected Utility and Mathematical Expectation

David Schmeidler, Peter P. Wakker

Abstract

1. Expected utility theory deals with choosing among acts where the decisionmaker does not know for sure which consequence will result from a chosen act. When faced with several acts, the decision–maker will choose the one with the highest ‘expected utility’, where the expected utility of an act is the sum of the products of probability and utility over all possible consequences.

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Available abstract

Key concepts: Expected utility hypothesis, Subjective expected utility, Utility theory, Decision maker, Von Neumann–Morgenstern utility theorem, Expected value, Decision theory, Actuarial science