Erkenntnis 79 (S6):1091-1117 (2014)

Authors
Lara Buchak
Princeton University
Abstract
The orthodox theory of instrumental rationality, expected utility (EU) theory, severely restricts the way in which risk-considerations can figure into a rational individual's preferences. It is argued here that this is because EU theory neglects an important component of instrumental rationality. This paper presents a more general theory of decision-making, risk-weighted expected utility (REU) theory, of which expected utility maximization is a special case. According to REU theory, the weight that each outcome gets in decision-making is not the subjective probability of that outcome; rather, the weight each outcome gets depends on both its subjective probability and its position in the gamble. Furthermore, the individual's utility function, her subjective probability function, and a function that measures her attitude towards risk can be separately derived from her preferences via a Representation Theorem. This theorem illuminates the role that each of these entities plays in preferences, and shows how REU theory explicates the components of instrumental rationality.
Keywords decision theory  expected utility theory  risk-weighted expected utility theory  risk  rationality  representation theorems  Savage axioms  tradeoff consistency  Allais paradox  instrumental rationality
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DOI 10.1007/s10670-013-9542-4
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References found in this work BETA

The Logic of Decision.Richard C. Jeffrey - 1965 - University of Chicago Press.
Risk and Rationality.Lara Buchak - 2013 - Oxford University Press.
The Logic of Decision.Henry E. Kyberg - 1968 - Philosophical Review 77 (2):250.

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Citations of this work BETA

Normative Decision Theory.Edward Elliott - 2019 - Analysis 79 (4):755-772.
A Dutch Book Theorem for Quantificational Credences.Benjamin Lennertz - 2017 - Ergo: An Open Access Journal of Philosophy 4.
On Risk and Rationality.Brad Armendt - 2014 - Erkenntnis 79 (S6):1-9.

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