Expected Qualitative Utility Maximization

TL;DR

This paper introduces Expected Qualitative Utility Maximization, a decision model that generalizes expected utility by relaxing key axioms, using nonstandard utilities and qualitative orderings, thus broadening the scope of decision theory.

Contribution

It presents a novel decision model that relaxes classical axioms, incorporates nonstandard utilities, and defines subjective probabilities from weakened postulates.

Findings

Encompasses Maximin criterion as a special case

Defines subjective probabilities as real numbers

Characterizes decision behavior with weakened von Neumann-Morgenstern axioms

Abstract

A model for decision making that generalizes Expected Utility Maximization is presented. This model, Expected Qualitative Utility Maximization, encompasses the Maximin criterion. It relaxes both the Independence and the Continuity postulates. Its main ingredient is the definition of a qualitative order on nonstandard models of the real numbers and the consideration of nonstandard utilities. Expected Qualitative Utility Maximization is characterized by an original weakening of von Neumann-Morgenstern's postulates. Subjective probabilities may be defined from those weakened postulates, as Anscombe and Aumann did from the original postulates. Subjective probabilities are numbers, not matrices as in the Subjective Expected Lexicographic Utility approach. JEL no.: D81 Keywords: Utility Theory, Non-Standard Utilities, Qualitative Decision Theory