We analyze the expressivity, succinctness, and complexity of a family of languages based on weighted propositional formulas for the representation of utility functions. The central idea underlying this form of preference modeling is to associate numerical weights with goals specified in terms of propositional formulas, and to compute the utility value of an alternative as the sum of the weights of the goals it satisfies. We define a large number of representation languages based on this idea, each (...) characterized by a set of restrictions on the syntax of formulas and the range of weights. Our aims are threefold. First, for each language we try to identify the class of utility functions it can express. Second, when different languages can express the same class of utility functions, one may allow for a more succinct representation than another. Therefore, we analyze the relative succinctness of languages. Third, for each language we study the computational complexity of the problem of finding the most preferred alternative given a utility function expressed in that language. (shrink)

Chateauneuf and Faro axiomatize a weighted version of maxmin expected utility over acts with nonnegative utilities, where weights are represented by a confidence function. We argue that their representation is only one of many possible, and we axiomatize a more natural form of maxmin weighted expected utility. We also provide stronger uniqueness results.

Elicitation methods in decision-making under risk allow us to infer the utilities of outcomes as well as the probability weights from the observed preferences of an individual. An optimally efficient elicitation method is proposed, which takes the inevitable distortion of preferences by random errors into account and minimizes the effect of such errors on the inferred utility and probability weighting functions. Under mild assumptions, the optimally efficient method for eliciting utilities and probability weights is the following three-stage procedure. First, (...) a probability is elicited whose subjective weight is one half. Second, the utility function is elicited through the midpoint chaining certainty equivalent method using the probability elicited at the first stage. Finally, the probability weighting function is elicited through the probability equivalent method. (shrink)

A detailed theoretical analysis is presented of what five utility representations – subjective expected utility (SEU), rank-dependent (cumulative or Choquet) utility (RDU), gains decomposition utility (GDU), rank weighted utility (RWU), and a configural-weight model (TAX) that we show to be equivalent to RWU – say about a series of independence properties, many of which were suggested by M. H. Birnbaum and his coauthors. The goal is to clarify what implications to draw about the descriptive (...) aspects of the representations from data concerning these properties. The upshot is a sharp rejection of SEU and RDU and no clear choice between GDU and TAX, but a list of 8 properties is given that should receive more attention to discriminate between the latter two models. (shrink)

Epistemic utility theory seeks to establish epistemic norms by combining principles from decision theory and social choice theory with ways of determining the epistemic utility of agents’ attitudes. Recently, Moss, 1053–69, 2011) has applied this strategy to the problem of finding epistemic compromises between disagreeing agents. She shows that the norm “form compromises by maximizing average expected epistemic utility”, when applied to agents who share the same proper epistemic utility function, yields the result that agents must (...) form compromises by splitting the difference between their credence functions. However, this “split the difference” norm is in conflict with conditionalization, since applications of the two norms don’t commute. A common response in the literature seems to be to abandon the procedure of splitting the difference in favor of compromise strategies that avoid non-commutativity. This would also entail abandoning Moss’ norm. I explore whether a different response is feasible. If agents can use epistemic utility-based considerations to agree on an order in which they will apply the two norms, they might be able to avoid diachronic incoherence. I show that this response can’t save Moss’ norm, because the agreements concerning the order of compromising and updating it generates are not stable over time, and hence cannot avoid diachronic incoherence. I also show that a variant of Moss’ norm, which requires that the weights given to each agent’s epistemic utility change in a way that ensures commutativity, cannot be justified on epistemological grounds. (shrink)

Lara Buchak argues for a version of rank-weighted utilitarianism that assigns greater weight to the interests of the worse off. She argues that our distributive principles should be derived from the preferences of rational individuals behind a veil of ignorance, who ought to be risk averse. I argue that Buchak’s appeal to the veil of ignorance leads to a particular way of extending rank-weighted utilitarianism to the evaluation of uncertain prospects. This method recommends choices that violate the unanimous (...) preferences of rational individuals and choices that guarantee worse distributions. These results, I suggest, undermine Buchak’s argument for rank-weighted utilitarianism. (shrink)

According to Stephen Finlay, ‘A ought to X’ means that X-ing is more conducive to contextually salient ends than relevant alternatives. This in turn is analysed in terms of probability. I show why this theory of ‘ought’ is hard to square with a theory of a reason’s weight which could explain why ‘A ought to X’ logically entails that the balance of reasons favours that A X-es. I develop two theories of weight to illustrate my point. I first look at (...) the prospects of a theory of weight based on expected utility theory. I then suggest a simpler theory. Although neither allows that ‘A ought to X’ logically entails that the balance of reasons favours that A X-es, this price may be accepted. For there remains a strong pragmatic relation between these claims. (shrink)

We introduce a type of weighted modal logic with explicit weights both in the language and in the models. The framework has its applications in epistemic logic for reasoning about agents’ knowledge based on their capability, and in deontic logic for agents’ choices based on their deontic capability or utilities. We make use of weighted Kripke models with the weights understood epistemically as a similarity measure between states and deontically as a measure of expected utilities. We present sound (...) and complete axiomatizations for the logics, and discuss variants and possible extensions. (shrink)

The present theory leads to a set of subjective weights such that the utility of an uncertain alternative (gamble) is partitioned into three terms involving those weights—a conventional subjectively weighted utility function over pure consequences, a subjectively weighted value function over events, and a subjectively weighted function of the subjective weights. Under several assumptions, this becomes one of several standard utility representations, plus a weighted value function over events, plus an entropy term of (...) the weights. In the finitely additive case, the latter is the Shannon entropy; in all other cases it is entropy of degree not 1. The primary mathematical tool is the theory of inset entropy. (shrink)

This article argues that there is a natural solution to carry out interpersonal comparisons of utility when the theory of gambles is supplemented with a group operation of joint receipts. If so, three types of people can exist, and the two types having multiplicative representations of joint receipt have, in contrast to most utility theories, absolute scales of utility. This makes possible, at least in principle, meaningful interpersonal comparisons of utility with desirable properties, thus resolving a (...) long standing philosophical problem and having potentially important implications in economics. Two behavioral criteria are given for the three classes of people. At this point the relative class sizes are unknown. (shrink)

There are decision problems where the preferences that seem rational to many people cannot be accommodated within orthodox decision theory in the natural way. In response, a number of alternatives to the orthodoxy have been proposed. In this paper, I offer an argument against those alternatives and in favour of the orthodoxy. I focus on preferences that seem to encode sensitivity to risk. And I focus on the alternative to the orthodoxy proposed by Lara Buchak’s risk-weighted expected utility (...) theory. I will show that the orthodoxy can be made to accommodate all of the preferences that Buchak’s theory can accommodate. (shrink)

Numerous studies have convincingly shown that prospect theory can better describe risky choice behavior than the classical expected utility model because it makes the plausible assumption that risk aversion is driven not only by the degree of sensitivity toward outcomes, but also by the degree of sensitivity toward probabilities. This article presents the results of an experiment aimed at testing whether agents become more sensitive toward probabilities over time when they repeatedly face similar decisions, receive feedback on the consequences (...) of their decisions, and are given ample incentives to reflect on their decisions, as predicted by Plott’s Discovered Preference Hypothesis (DPH). The results of a laboratory experiment with N = 62 participants support this hypothesis. The elicited subjective probability weighting function converges significantly toward linearity when respondents are asked to make repeated choices and are given direct feedback after each choice. Such convergence to linearity is absent in an experimental treatment where respondents are asked to make repeated choices but do not experience the resolution of risk directly after each choice, as predicted by the DPH. (shrink)

No existing normative decision theory adequately handles risk. Expected Utility Theory is overly restrictive in prohibiting a range of reasonable preferences. And theories designed to accommodate such preferences (for example, Buchak's (2013) Risk‐Weighted Expected Utility Theory) violate the Betweenness axiom, which requires that you are indifferent to randomizing over two options between which you are already indifferent. Betweenness has been overlooked by philosophers, and we argue that it is a compelling normative constraint. Furthermore, neither Expected nor Risk‐ (...) class='Hi'>Weighted Expected Utility Theory allow for stakes‐sensitive risk‐attitudes—they require that risk matters in the same way whether you are gambling for loose change or millions of dollars. We provide a novel normative interpretation of Weighted‐Linear Utility Theory that solves all of these problems. (shrink)

We present a minimal pragmatic restriction on the interpretation of the weights in the “Equal Weight View” regarding peer disagreement and show that the view cannot respect it. Based on this result we argue against the view. The restriction is the following one: if an agent, $$\hbox {i}$$ i, assigns an equal or higher weight to another agent, $$\hbox {j}$$ j,, he must be willing—in exchange for a positive and certain payment—to accept an offer to let a completely rational and (...) sympathetic $$\hbox {j}$$ j choose for him whether to accept a bet with positive expected utility. If $$\hbox {i}$$ i assigns a lower weight to $$\hbox {j}$$ j than to himself, he must not be willing to pay any positive price for letting $$\hbox {j}$$ j choose for him. Respecting the constraint entails, we show, that the impact of disagreement on one’s degree of belief is not independent of what the disagreement is discovered to be. (shrink)

Numerous approaches have been taken in an effort to find a non-anthropocentric ethic that will lead to greater consideration of animals. Most of the recent approaches in this area have been rights-based. It is argued here that a rights-based approach alone fails both theoretically and in practical applications. It is shown that in theory these approaches can lead to unsound conclusions and cannot handle uncertainty. In addition, in practice the rules of the rights-based approaches will often be violated. A (...) class='Hi'>utility approach with unequal weighting for different species subject to certain rights or obligations is proposed as an alternative. This approach is intended to be operational rather than purely theoretical and therefore would be based on a negotiated consensus rather than a priori theory. (shrink)

In this paper, we provide two novel expected utility theorems by suitably adjusting the independence and continuity axioms. Our first theorem characterizes expected utility preferences using weak versions of the independence axiom (with varying mixture weights) and a new weak continuity axiom. Our second theorem characterizes these preferences using weaker versions of the independence axiom (with mixture weights fixed at 1/2) and a strong topological continuity axiom. We provide useful examples to illustrate the tightness of these characterizations.

Distributed programming paradigms such as MapReduce and Spark have alleviated sequential bottleneck while mining of massive transaction databases. Of significant importance is mining High Utility Itemset that incorporates the revenue of the items purchased in a transaction. Although a few algorithms to mine HUIs in the distributed environment exist, workload skew and data transfer overhead due to shuffling operations remain major issues. In the current study, Parallel Utility Computation algorithm has been proposed with novel grouping and load balancing (...) strategies for an efficient mining of HUIs in a distributed environment. To group the items, Transaction Weighted Utility values as a degree of transaction similarity is employed. Subsequently, these groups are assigned to the nodes across the cluster by taking into account the mining load due to the items in the group. Experimental evaluation on real and synthetic datasets demonstrate that PUC with TWU grouping in conjunction with load balancing converges mining faster. Due to reduced data transfer, and load balancing-based assignment strategy, PUC outperforms different grouping strategies and random assignment of groups across the cluster. Also, PUC is shown to be faster than PHUI-Growth algorithm with a promising speedup. (shrink)

BackgroundAntipsychotic-induced weight gain is a contributing factor in the reduced life expectancy reported amongst people with psychotic disorders. CYP2D6 is a liver enzyme involved in the metabolism of many commonly used antipsychotic medications. We investigated if CYP2D6 genetic variation influenced weight or BMI among people taking antipsychotic treatment.MethodsWe conducted a systematic review and a random effects meta-analysis of publications in Pubmed, Embase, PsychInfo, and CENTRAAL that had BMI and/or weight measurements of patients on long-term antipsychotics by their CYP2D6-defined metabolic groups.ResultsTwelve (...) studies were included in the systematic review. All cohort studies suggested that the presence of reduced-function or non-functional alleles for CYP2D6 was associated with greater antipsychotic-induced weight gain, whereas most cross-sectional studies did not find any significant associations. Seventeen studies were included in the meta-analysis with clinical data of 2,041 patients, including 93 poor metabolizers, 633 intermediate metabolizers, 1,272 normal metabolizers, and 30 UMs. Overall, we did not find associations in any of the comparisons made. The estimated pooled standardized differences for the following comparisons were PM versus NM; weight = –0.07, BMI = 0.40. IM versus NM; weight = 0.09 and BMI = 0.09. UM versus EM; weight = 0.01 and BMI = –0.08.ConclusionOur systematic review of cohort studies suggested that CYP2D6 poor metabolizers have higher BMI than normal metabolizers, but the data of cross-sectional studies and the meta-analysis did not show this association. Although our review and meta-analysis constitutes one of the largest studies with comprehensively genotyped samples, the literature is still limited by small numbers of participants with genetic variants resulting in poor or UMs status. We need further studies with larger numbers of extreme metabolizers to establish its clinical utility in antipsychotic treatment. CYP2D6 is a key gene for personalized prescribing in mental health. (shrink)

Several studies have established the prevalence of discrimination upon the basis of weight in healthcare; however, these studies lack the element of human experience that makes addressing the issue vital to both individual and public health. Narrative medicine is an interdisciplinary field that utilizes powerful narrative skills and creativity to address the needs of those who seek and deliver healthcare, promoting healing, and self-reflection for both patients and physicians. This paper seeks to re-evaluate key studies regarding the issue of weight (...) discrimination in healthcare through the lens of narrative medicine. In doing so, it further integrates the aspect of human experience into the study of medical ethics in order to improve the lived experience of overweight individuals in medicine. (shrink)

New and recent axioms for cooperative games with transferable utilities are introduced. The non-negative player axiom requires to assign a non-negative payoff to a player that belongs to coalitions with non-negative worth only. The axiom of addition invariance on bi-partitions requires that the payoff vector recommended by a value should not be affected by an identical change in worth of both a coalition and the complementary coalition. The nullified solidarity axiom requires that if a player who becomes null weakly loses (...) from such a change, then every other player should weakly lose too. We study the consequence of imposing some of these axioms in addition to some classical axioms. It turns out that the resulting values or set of values have all in common to split efficiently the worth achieved by the grand coalition according to an exogenously given weight vector. As a result, we also obtain new characterizations of the equal division value. (shrink)

This article develops an unconventional perspective on the utilitarianism of Bentham and Mill in at least four areas. First, it is shown that both authors conceived of utility as irreducibly multi-dimensional, and that Bentham in particular was very much aware of the ambiguity that multi-dimensionality imposes upon optimal choice under the greatest happiness principle. Secondly, I argue that any attribution of intrinsic worth to any form of human behaviour violates the first principles of Bentham's and Mill's utilitarianism, and that (...) this renders both authors immune to the claim by G. E. Moore that they committed a ‘naturalistic fallacy’. Thirdly, in light of these contentions, I find no flaw in Mill's ‘proof of utility’. Fourthly, I use the notion of intrapersonal utility weights to provide an interpretation of Mill's qualitative hedonism that is entirely consistent with his value monism. (shrink)

Numerous studies have convincingly shown that prospect theory can better describe risky choice behavior than the classical expected utility model because it makes the plausible assumption that risk aversion is driven not only by the degree of sensitivity toward outcomes, but also by the degree of sensitivity toward probabilities. This article presents the results of an experiment aimed at testing whether agents become more sensitive toward probabilities over time when they repeatedly face similar decisions, receive feedback on the consequences (...) of their decisions, and are given ample incentives to reflect on their decisions, as predicted by Plott’s Discovered Preference Hypothesis (DPH). The results of a laboratory experiment with N = 62 participants support this hypothesis. The elicited subjective probability weighting function converges significantly toward linearity when respondents are asked to make repeated choices and are given direct feedback after each choice. Such convergence to linearity is absent in an experimental treatment where respondents are asked to make repeated choices but do not experience the resolution of risk directly after each choice, as predicted by the DPH. (shrink)

We find suggestive evidence that emotional balance has an impact on probability weighting incremental to demographic controls. Specifically, low negative affectivity (implying high emotional balance) tends to be a characteristic of those whose probability weighting functions exhibit lower curvature and more neutral elevation. In other words, emotional balance seems to push people in the direction of normative expected utility theory.

Some early phase clinical studies of candidate HIV cure and remission interventions appear to have adverse medical risk–benefit ratios for participants. Why, then, do people participate? And is it ethically permissible to allow them to participate? Recent work in decision theory sheds light on both of these questions, by casting doubt on the idea that rational individuals prefer choices that maximise expected utility, and therefore by casting doubt on the idea that researchers have an ethical obligation not to enrol (...) participants in studies with high risk–benefit ratios. This work supports the view that researchers should instead defer to the considered preferences of the participants themselves. This essay briefly explains this recent work, and then explores its application to these two questions in more detail. (shrink)

In a recent paper Winsberg (2021) argued in favor of research into geoengineering by relying on Good’s theorem, which states that conducting research maximizes one’s expected utility. However, this result sometimes fails for risk-avoidant agents (Buchak 2010). Since risk avoidance captures some of the ’precautionary’ intuitions that critics of geoengineering share, it is important to see if geoengineering research would maximize one’s utility if risk avoidance is taken into account. I show that under some conditions conducting geoengineering research (...) would not maximize risk-weighted expected utility. (shrink)

Some people have supposed that utility is good in itself, non-in-strumentally good, as distinct from good because conducive to other good things. And in modern versions of this view, utility often means want-satisfaction, as distinct from pleasure or happiness. For your want that p to be satisfied, is it necessary that you know or believe that p, or sufficient merely that p is true? However that question is answered, there are problems with the view that want-satisfaction is a (...) non-instrumental good. What if you want something only because you have a false belief? What if the time at which you want that p is fifty or five hundred years before the time to which p itself refers? To meet these difficulties, qualifications have to be introduced, and much has been written about how exactly these qualifications are to be framed.1 There is however what may be a rather more serious objection to the view that want-satisfaction is a non-instrumental good, or rather to the combination of that view with the principle that it is sufficient for your want that p to be satisfied simply that p is true. The objection is that this combination forces you to give undue weight to the mere acquisition of desires when you come to make judgements about changes in the value of things. It forces you to say that for any true proposition p, which initially you do not want to be true, your mere acquisition of a desire that p will, other things being equal, make the world better. Non-instrumental value can be increased merely by multiplying desires, even though everything else remains the same. Surely, however, improving the world is not as easy as that. (shrink)

The main purpose of this article is to introduce the weighted ENSC value for cooperative transferable utility games which takes into account players’ selfishness about the payoff allocations. Similar to Shapley’s idea of a one-by-one formation of the grand coalition [Shapley ], we first provide a procedural implementation of the weighted ENSC value depending on players’ selfishness as well as their marginal contributions to the grand coalition. Second, in the spirit of the nucleolus [Schmeidler ], we prove (...) that the weighted ENSC value is obtained by lexicographically minimizing a complaint vector associated with a new complaint criterion relying on players’ selfishness. (shrink)

This paper merges the non-expected utility approach (Tversky and Kahneman, J Risk Uncertain 5:297–323, 1992 and Quiggin, J Econ Behav Organ 3:323–343, 1982) into Akerlof’s (Quart J Econ 84:488–500, 1970) model of Market for Lemons. We derive the results for different probability weighting functions and analyze the phenomenon of market failure in light of non-expected utility maximization. Our main finding suggests that when the proportion of traded lemons is high (low), the problem of market failure is mitigated (enhanced). (...) In addition, for the case of Cumulative Prospect Theory, we show that (a) the higher the loss aversion is, the more pronounced is the market failure; (b) gain-domain elevation is negatively related to the extent of market failure; and (c) the value function is (i) negatively monotonic in the gain-domain diminishing sensitivity parameter when the market is characterized by a high proportion of “peaches,” and (ii) positively monotonic in the loss-domain diminishing sensitivity parameter when the market is characterized by a high proportion of “lemons.”. (shrink)

We develop a model of Disappointment in which disappointment and elation arise from comparing the outcome received, not with an expected value as in previous models, but rather with the other individual outcomes of the lottery. This approach may better reflect the way individuals are liable to experience disappointment. The model obtained accounts for classic behavioral deviations from the normative theory, offers a richer structure than previous disappointment models, and leads to a Rank-Dependent Utility formulation in a transparent way. (...) Thus, our disappointment model may provide a clear psychological rationale for the subjective transformation of probabilities. (shrink)

The question of how to allocate scarce medical resources has become an important public policy issue in recent decades. Cost-Utility Analysis is the most commonly used method for determining the allocation of these resources, but this book counters the argument that overcoming its inherent imbalances is simply a question of implementing methodological changes. The Economics of Resource-Allocation in Healthcare represents the first comprehensive analysis of equity weighting in health care resource allocation that offers a fundamental critique of its basic (...) framework. It offers a heterodox account of health economics, putting the discourse on economic evaluation into it broader socio-political context. Such an approach broadens the debate on fairness in health economics and ties it in with deeper rooted problems in moral philosophy. Ultimately, this interdisciplinary study calls for the adoption of a fundamentally different paradigm to address the distribution of scarce medical resources. This book will be of interest to policy makers, health care professionals or Post-Graduate students looking to broaden their understanding of the economics of the healthcare system. (shrink)

In comparing different risk elicitation methods under the assumptions of expected utility theory, previous studies have found significant differences in the elicited risk attitudes. This paper extends this line of research to consider cumulative prospect theory by comparing risk attitudes and probability weightings determined using two elicitation methods: the method by Tanaka et al. :557–571, 2010; TCN method) and the method by Wakker and Deneffe :1131–1150, 1996; WD method). We demonstrate that the two methods reveal significantly different mean values (...) for the measured risk attitudes. Participants are classified on average as moderately risk-averse using the TCN method, whereas the same individuals are classified as nearly risk-neutral using the WD method. Moreover, we find that on average, participants overweight low probabilities and underweight high probabilities to a greater extent with the WD method than with the TCN method. Therefore, the different elicitation methods, that both consider probability weighting, can lead to different measured values of risk attitude and probability weighting. (shrink)

The term ‘communitarianism’ is often identified with ‘altruism’: an individual is taken to be communitarian-minded if he or she is concerned with the well-being of others, and not only with his or her own well-being. While communitarianism may embrace altruism, it is most appositely viewed as having a broader connotation. Consider, for example, the puzzle of voting behaviour, discussed by Amitai Etzioni and many others ). Casting one's vote entails a cost, albeit usually a small one: however, if there are (...) large numbers voting, then one's own vote has a negligible effect on the outcome. An altruist might therefore rationally refrain from voting, since he incurs a cost, and neither he nor anybody else receives a benefit. And yet, millions of people the world over regularly vote in elections. Other examples could also be given. ‘Group-oriented’ behaviour has been the focus of a number of recent studies. C. Clague, for example, examines the roles of guilt and shame in discouraging tax evasion, and informally discusses how social influences may affect the strength of these sentiments. R. Naylor and M. Cripps examine the influence of social custom on individuals' propensity to join trade unions, while P. Nelson argues that in choosing which party to vote for people assign some weight to the preferences of persons they associate with. (shrink)

Ellsberg (The Quarterly Journal of Economics 75, 643–669 (1961); Risk, Ambiguity and Decision, Garland Publishing (2001)) argued that uncertainty is not reducible to risk. At the center of Ellsberg’s argument lies a thought experiment that has come to be known as the three-color example. It has been observed that a significant number of sophisticated decision makers violate the requirements of subjective expected utility theory when they are confronted with Ellsberg’s three-color example. More generally, such decision makers are in conflict (...) with either the ordering assumption or the independence assumption of subjective expected utility theory. While a clear majority of the theoretical responses to these violations have advocated maintaining ordering while relaxing independence, a persistent minority has advocated abandoning the ordering assumption. The purpose of this paper is to consider a similar dilemma that exists within the context of multiattribute models, where it arises by considering indeterminacy in the weighting of attributes rather than indeterminacy in the determination of probabilities as in Ellsberg’s example. (shrink)

The majority consensus in the empirical literature is that probability weighting functions are typically inverse-S shaped, that is, people tend to overweight small and underweight large probabilities. A separate stream of literature has reported event-splitting effects and shown that they can explain violations of expected utility. This leads to the questions whether the observed shape of weighting functions is a mere consequence of the coalesced presentation and, more generally, whether preference elicitation should rely on presenting lotteries in a canonical (...) split form instead of the commonly used coalesced form. We analyze data from a binary choice experiment where all lottery pairs are presented in both split and coalesced forms. Our results show that the presentation in a split form leads to a better fit of expected utility theory and to probability weighting functions that are closer to linear. We thus provide some evidence that the extent of probability weighting is not an ingrained feature, but rather a result of processing difficulties. (shrink)

A review of some major topics of debate in normative decision theory from circa 2007 to 2019. Topics discussed include the ongoing debate between causal and evidential decision theory, decision instability, risk-weighted expected utility theory, decision-making with incomplete preferences, and decision-making with imprecise credences.

This article argues that Lara Buchak’s risk-weighted expected utility (REU) theory fails to offer a true alternative to expected utility theory. Under commonly held assumptions about dynamic choice and the framing of decision problems, rational agents are guided by their attitudes to temporally extended courses of action. If so, REU theory makes approximately the same recommendations as expected utility theory. Being more permissive about dynamic choice or framing, however, undermines the theory’s claim to capturing a steady (...) choice disposition in the face of risk. I argue that this poses a challenge to alternatives to expected utility theory more generally. (shrink)

I have claimed that risk-weighted expected utility maximizers are rational, and that their preferences cannot be captured by expected utility theory. Richard Pettigrew and Rachael Briggs have recently challenged these claims. Both authors argue that only EU-maximizers are rational. In addition, Pettigrew argues that the preferences of REU-maximizers can indeed be captured by EU theory, and Briggs argues that REU-maximizers lose a valuable tool for simplifying their decision problems. I hold that their arguments do not succeed and (...) that my original claims still stand. However, their arguments do highlight some costs of REU theory. (shrink)

Discounted utility theory and its generalizations use discount functions for weighting utilities of outcomes received in different time periods. We propose a new simple test of convexity–concavity of discount function. This test can be used with any utility function and any preferences over risky lotteries. The data from a controlled laboratory experiment show that about one third of experimental subjects reveal a concave discount function and another one third of subjects reveal a convex discount function.

When you are indifferent between two options, it’s rationally permissible to take either. One way to decide between two such options is to flip a fair coin, taking one option if it lands heads and the other if it lands tails. Is it rationally permissible to employ such a tie-breaking procedure? Intuitively, yes. However, if you are genuinely risk-averse—in particular, if you adhere to risk-weighted expected utility theory (Buchak in Risk and rationality, Oxford University Press, 2013) and have (...) a strictly convex risk-function—the answer will often be no: the REU of deciding by coin-flip will be lower than the REU of choosing one of the options outright (so long as at least one of the options is a nondegenerate gamble). This turns out to be a significant worry for risk-weighted expected utility theory. I argue that it adds real bite to established worries about diachronic consistency afflicting views, like risk-weighted expected utility theory, that violate Independence. And that, while these worries might be surmountable, surmounting them comes at a price. (shrink)

This article presents the results of an experiment that completely measures the utility function and probability weighting function for different positive and negative monetary outcomes, using a representative sample of N = 1,935 from the general public. The results confirm earlier findings in the lab, suggesting that utility is less pronounced than what is found in classical measurements where expected utility is assumed. Utility for losses is found to be convex, consistent with diminishing sensitivity, and the (...) obtained loss-aversion coefficient of 1.6 is moderate but in agreement with contemporary evidence. The estimated probability weighting functions have an inverse-S shape and they imply pessimism in both domains. These results show that probability weighting is also an important phenomenon in the general population. Women and lower educated individuals are found to be more risk averse, in agreement with common findings. In contrast to previous studies that ascribed gender differences in risk attitudes solely to differences in the degree utility curvature, however, our results show that this finding is primarily driven by loss aversion and, for women, also by a more pessimistic psychological response toward the probability of obtaining the best possible outcome. (shrink)

Classical bargaining theory attempts to solve a bargaining problem using only the information about the problem contained in the representation of its possible outcomes in utility space. However, this information usually underdetermines the solution. I use additional information about interpersonal comparisons of utility and bargaining power. The solution is then the outcome that maximizes the sum of power-weighted utilities. I use these results to advance a contractarian argument for a utilitarian form of social cooperation. As the original (...) position, I propose a hypothetical situation in which the members of society are rational, fully informed, free, and equal. I argue that in this original position they would adopt a utilitarian form of social cooperation. I conclude that utilitarian cooperation constitutes a moral ideal toward which society ought to aspire. (shrink)

Classical bargaining theory attempts to solve a bargaining problem using only the information about the problem contained in the representation of its possible outcomes in utility space. However, this information usually underdetermines the solution. I use additional information about interpersonal comparisons of utility and bargaining power. The solution is then the outcome that maximizes the sum of power-weighted utilities. I use these results to advance a contractarian argument for a utilitarian form of social cooperation. As the original (...) position, I propose a hypothetical situation in which the members of society are rational, fully informed, free, and equal. I argue that in this original position they would adopt a utilitarian form of social cooperation. I conclude that utilitarian cooperation constitutes a moral ideal toward which society ought to aspire. (shrink)

Ramsey (1926) sketches a proposal for measuring the subjective probabilities of an agent by their observable preferences, assuming that the agent is an expected utility maximizer. I show how to extend the spirit of Ramsey's method to a strictly wider class of agents: risk-weighted expected utility maximizers (Buchak 2013). In particular, I show how we can measure the risk attitudes of an agent by their observable preferences, assuming that the agent is a risk-weighted expected utility (...) maximizer. Further, we can leverage this method to measure the subjective probabilities of a risk-weighted expected utility maximizer. (shrink)

In this paper, we investigate some implications of recent results about salience on loan decisions. Using the framework of focus-weighted utility we show that consumers might take out loans even when that yield them negative utility due to the focusing bias. We suggest, however, that this can be counterbalanced and consumers might be more prudent in their decisions and less likely to take out such loans when the usual fixed-installments plan is coupled with an equivalent decreasing-installments option. (...) Moreover, we show that this is true even for loans with prepayment options or when borrowers take default into consideration. We argue that harmful loan consumption could be decreased if a policy would prescribe presentation of loan repayment schedules in a way that employs this effect. (shrink)

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. (shrink)

Veritism says that the fundamental source of epistemic value for a doxastic state is the extent to which it represents the world correctly: that is, its fundamental epistemic value is deter...

This paper reviews the most common approaches that have been adopted to analyze and describe loss aversion under prospect theory. Subsequently, it is argued that loss aversion is a property of observable choice behavior and two new definitions of loss averse behavior are advocated. Under prospect theory, the new properties hold if the commonly used utility based measures of loss aversion are corrected by a probability based measure of loss aversion and their product exceeds 1. It is shown that (...) prominent parametric families of weighting functions, while successful in accommodating empirical findings on probabilistic risk attitudes, may not fit well with the theoretical implications of the new loss averse behavior conditions. (shrink)