3. Utility

  1. Giovanni Parmigiani1 and
  2. Lurdes Y. T. Inoue2

Published Online: 1 DEC 2010

DOI: 10.1002/9780470746684.ch3

Decision Theory

Decision Theory

How to Cite

Parmigiani, G. and Inoue, L. Y. T. (2009) Utility, in Decision Theory, John Wiley & Sons, Ltd, Chichester, UK. doi: 10.1002/9780470746684.ch3

Author Information

  1. 1

    Johns Hopkins University, Baltimore, USA

  2. 2

    University of Washington, Seattle, USA

Publication History

  1. Published Online: 1 DEC 2010
  2. Published Print: 17 APR 2009

Book Series:

  1. Wiley Series in Probability and Statistics

Book Series Editors:

  1. Walter A. Shewhart and
  2. Samuel S. Wilks

ISBN Information

Print ISBN: 9780471496571

Online ISBN: 9780470746684



  • goal of decision theory - to help choose among actions whose consequences cannot be completely anticipated;
  • relationship between acting rationally and ranking actions based on their expected utility;
  • St. Petersburg paradox - notion that mathematical expectation should guide rational choice under uncertainty as early as seventeenth century;
  • expected utility theory and theory of means;
  • utility and means;
  • associative means;
  • functional means;
  • expected utility principle;
  • von Neumann–Morgenstern representation theorem


This chapter contains sections titled:

  • St. Petersburg paradox

  • Expected utility theory and the theory of means

  • The expected utility principle

  • The von Neumann–Morgenstern representation theorem

  • Allais' criticism

  • Extensions

  • Exercises