Subjective Expected Utility and Psychological Gambles

TL;DR

This paper provides a simple characterization of expected utility using psychological gambles, relying only on coherence between preferences before and after choices, and extends to minimax and Choquet expected utility with weaker coherence.

Contribution

It introduces an elementary, coherence-based framework for expected utility and its variants, avoiding complex assumptions of traditional models.

Findings

Characterizes expected utility through psychological gambles and preference coherence.

Links weaker coherence to minimax and Choquet expected utility.

Provides a foundational understanding of decision models under uncertainty.

Abstract

We obtain an elementary characterization of expected utility based on a representation of choice in terms of psychological gambles, which requires no assumption other than coherence between ex-ante and ex-post preferences. Weaker version of coherence are associated with various attitudes towards complexity and lead to a characterization of minimax or Choquet expected utility.