A Quantum-Conceptual Explanation of Violations of Expected Utility in Economics

TL;DR

This paper proposes a quantum-inspired model to explain violations of expected utility in economics, linking cognitive phenomena like the disjunction effect to quantum conceptual thought within decision processes.

Contribution

It introduces a quantum conceptual framework to explain decision violations, integrating quantum formalism with economic decision theory.

Findings

Quantum formalism models the Hawaii problem effectively.

Disjunction effect linked to quantum conceptual thought.

Decision dynamics influenced by conceptual landscape.

Abstract

The expected utility hypothesis is one of the building blocks of classical economic theory and founded on Savage's Sure-Thing Principle. It has been put forward, e.g. by situations such as the Allais and Ellsberg paradoxes, that real-life situations can violate Savage's Sure-Thing Principle and hence also expected utility. We analyze how this violation is connected to the presence of the 'disjunction effect' of decision theory and use our earlier study of this effect in concept theory to put forward an explanation of the violation of Savage's Sure-Thing Principle, namely the presence of 'quantum conceptual thought' next to 'classical logical thought' within a double layer structure of human thought during the decision process. Quantum conceptual thought can be modeled mathematically by the quantum mechanical formalism, which we illustrate by modeling the Hawaii problem situation, a well-known example of the disjunction effect, and we show how the dynamics in the Hawaii problem situation is generated by the whole conceptual landscape surrounding the decision situation.