David Bourget (Western Ontario)
David Chalmers (ANU, NYU)
Rafael De Clercq
Jack Alan Reynolds
Learn more about PhilPapers
British Journal for the Philosophy of Science 37 (4):419-442 (1986)
The rule to maximize expected utility is intended for decisions where options involve risk. In those decisions the decision maker's attitude toward risk is important, and the rule ought to take it into account. Allais's and Ellsberg's paradoxes, however, suggest that the rule ignores attitudes toward risk. This suggestion is supported by recent psychological studies of decisions. These studies present a great variety of cases where apparently rational people violate the rule because of aversion or attraction to risk. Here I attempt to resolve the issue concerning expected utility and risk. I distinguish two versions of the rule to maximize expected utility. One adopts a broad interpretation of the consequences of an option and has great intuitive appeal. The other adopts a narrow interpretation of the consequences of an option and seems to have certain technical and practical advantages. I contend that the version of the rule that interprets consequences narrowly does indeed neglect attitudes toward risk. That version of the rule excludes the risk involved in an option from the consequences of the option and, contrary to what is usually claimed, cannot make up for this exclusion through adjustments in probability and utility assignments. I construct a new, general argument that establishes this in a rigorous way. On the other hand, I contend that the version of the rule that interprets consequences broadly takes account of attitudes toward risk by counting the risk involved in an option among the consequences of the option. I rebut some objections to this version of the rules, in particular, the objection that the rule lacks practical interest. Drawing upon the literature on 'mean-risk' decision rules, I show that this version of the rule can be used to solve some realistic decision problems
|Keywords||No keywords specified (fix it)|
|Categories||categorize this paper)|
|Through your library||Configure|
Similar books and articles
Paul Weirich (1988). Trustee Decisions in Investment and Finance. Journal of Business Ethics 7 (1-2):73 - 80.
John Kadvany (1997). Varieties of Risk Representations. Journal of Social Philosophy 28 (3):123-143.
Richard Watt, Francisco J. Vázquez & Ignacio Moreno (2001). An Experiment on Rational Insurance Decisions. Theory and Decision 51 (2/4):247-296.
Paola Ferretti, Temporal Risk Aversion: What Determines the Attitude of the Decision Maker? The Case of the Buyer Decision Maker.
Gerd Weinrich (1999). Nondegenerate Intervals of No-Trade Prices for Risk Averse Traders. Theory and Decision 46 (1):79-99.
Moez Abouda & Alain Chateauneuf (2002). Positivity of Bid-Ask Spreads and Symmetrical Monotone Risk Aversion. Theory and Decision 52 (2):149-170.
Andreas Lange (2001). A Note on Decisions Under Uncertainty: The Impact of the Choice of the Welfare Measure. Theory and Decision 51 (1):51-71.
Teddy Seidenfeld, Extensions of Expected Utility Theory and Some Limitations of Pairwise Comparisons.
Paul Weirich (2001). Risk's Place in Decision Rules. Synthese 126 (3):427 - 441.
Added to index2009-01-28
Total downloads10 ( #118,450 of 1,010,916 )
Recent downloads (6 months)1 ( #64,700 of 1,010,916 )
How can I increase my downloads?