Year: 2021
Type: book-chapter
Abstract: Neoclassical economists use expected utility theory to explain, predict, and prescribe choices under risk, that is, choices where the decision-maker knows – or at least deems it suitable to act as if she knows – the relevant probabilities. Expected utility theory has been subject to both empirical and conceptual criticism. This chapter reviews expected utility theory and the main criticism it has faced. It ends with a brief discussion of subjective expected utility theory, which is the theory neoclassical economists use to explain, predict, and prescribe choices under uncertainty, that is, choices where the decision-maker cannot act on the basis of objective probabilities but must instead consult her own subjective probabilities.
Source: Routledge eBooks
Author: H. Orri Stefánsson
Institutions: Stockholm University, Swedish Collegium for Advanced Study
Language: English
Subfield: General Decision Sciences
Field: Decision Sciences
Domain: Social Sciences
Open Access status: bronze
OpenAlex ID: W3205620322