Foundations of Utility and Risk Theory with Applications
In this volume we present some o~ the papers that were delivered at FUR-82 - the First International Con~erence on Foundations o~ Utility and Risk Theory in Oslo, June 1982. The purpose o~ the con~erence was to provide a ~orum within which scientists coul
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THEORY AND DECISION LIBRARY
'
AN INTERNATIONAL SERIES IN THE PHILOSOPHY AND METHODOLOGY OF THE SOCIAL AND BEHAVIORAL SCIENCES
Editors GERALD EBERLEIN, University ofTechnology, Munich WERNER LEINFELLNER, University of Nebraska
Editorial Advisory Board K. BORCH, Norwegian School of Economics and Business Administration M. BUNGE, McGill University J. s. COLEMAN, University ofChicago W. KROEBER-RIEL, University of Saarland A. RAPOPORT, University or Toronto F. SCHICK, Rutgers University A. SEN, Oxford University W. STEGMÜLLER, University of Munich K. SZANIAWSKI, University ofWarsaw L. TONDL, Prague A. TVERSKY, Stanford University
VOLUME37
FOUNDATIONS OF UTILITY AND RISK THEORY WITH APPLICATIONS
Edited by BERNT P. STIGUM University of Olso, Norway
and FRED WENSH/)P Norwegian School of Management, Bekkestua, Norway
SPRINGER-SCIENCE+BUSINESS MEDIA, B.V.
Library of Congress Cataloging in Publication Data Main entry under title: Foundations of utility and risk theory with applications. (Theory and decision library ; v. 37) Includes indexes. 1. Utility theory-Addresses, essays, 1ectures. 2. Risk-Addresses, essays, 1ectures. I. Stigum, Bernt P. II. Wenstq,p, Fred, 1945111. Series. HB201.F58 1983 330.15'7 83-13774 ISBN 978-90-481-8364-7 ISBN 978-94-017-1590-4 (eBook) DOI 10.1007/978-94-017-1590-4
All Rights Reserved © 1983 by Springer Science+Business Media Dordrecht Origina11y published by D. Reidel Publishing Company, Dordrecht, Holland in 1983 Softcoverreprint of the bardeover 1st edition 1983 and copyright ho1ders as specified on appropriate pages within No part of the material protected by this copyright notice may be reproduced or utilized in any form or by any means, e1ectronic or mechanical inc1uding photocopying, recording or by any i.D.formation storage and retrieval system, without written permission from the copyright owner
TABLE OF CONTENTS EDITORIAL PREFACE
vii
PART I I INTRODUCTION MAURICE ALLAIS I Opening Address OLE HAGEN I Paradoxes and Their Solutions KENNETH J. ARROW I Behavior Under Uncertainty and Its Implications for Policy
3 5 19
PART II I CONCEPTS OF PROBABILITY MAURICE ALLAIS I Frequency, Probability and Chance HERMAN WOLD I Utility Analysis from the Point of View of Model Building _ NILS-ERIC SAHLIN I On Second Order Probabilities and the Notion of Epistemic Risk
35 87 95
PART III I ARGUMENTS AGAINST EXPECTED UTILITY
I Expected Utility Theory Does Not Apply to All Rational Men EDWARD F. McCLENNEN I Sure-Thing Doubts ROBIN POPE I The Pre-Outcome Period and the Utility of Gambling J. M. BLATT
107 117 137
PART IV I PROBABILITY AND UTILITY IN REALITY MARK McCORD and RICHARD de NEUFVILLE I Empirical Demonst:ation that Expected Utility Decision Analysis is Not Operational ROMAN KRZYSZTOFOWICZ I Risk Attitude Hypotheses of · Utility Theory GEORGE WRIGHT I Probabilistic Forecasts: Some Results and Speculations GEORGE WRIGHT and PETER WHALLEY I The Supra-Additivity of Subjective Probability
181 201 217 233
PART V I CHOICE WITHOUT EXPECTED UTILITY HECTOR A. MDNERA and RICHARD de NEU
