# 3. Utility

Published Online: 1 DEC 2010

DOI: 10.1002/9780470746684.ch3

Copyright © 2009 John Wiley & Sons, Ltd

Book Title

## Decision Theory

Additional Information

#### 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

#### Publication History

- Published Online: 1 DEC 2010
- Published Print: 17 APR 2009

#### Book Series:

#### Book Series Editors:

- Walter A. Shewhart and
- Samuel S. Wilks

#### ISBN Information

Print ISBN: 9780471496571

Online ISBN: 9780470746684

- Summary
- Chapter

### Keywords:

- 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

### Summary

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