Premium
An argument for the principle of maximizing expected utility
Author(s) -
Peterson Martin
Publication year - 2002
Publication title -
theoria
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 16
eISSN - 1755-2567
pISSN - 0040-5825
DOI - 10.1111/j.1755-2567.2002.tb00124.x
Subject(s) - mathematical economics , axiom , von neumann architecture , argument (complex analysis) , expected utility hypothesis , von neumann–morgenstern utility theorem , axiom independence , principal (computer security) , mathematics , computer science , pure mathematics , biochemistry , chemistry , geometry , operating system
The main result of this paper is a formal argument for the principle of maximizing expected utility that does not rely on the law of large numbers. Unlike the well‐known arguments by Savage and von Neumann & Morgenstern, this argument does not presuppose the sure‐thing principle or the independence axiom. The principal idea is to use the concept of transformative decision rules for decomposing the principle of maximizing expected utility into a sequence of normatively reasonable subrules. It is shown that this procedure provides a resolution of Allais's paradox that cannot be obtained by Savage‐style or von Neumann & Morgenstern‐style arguments.