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Is Expected Utility Theory Normative for Medical Decision Making?

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  • Brian J. Cohen

Abstract

Expected utility theory is felt by its proponents to be a normative theory of decision making under uncertainty. The theory starts with some simple axioms that are held to be rules that any rational person would follow It can be shown that if one adheres to these axioms, a numerical quantity, generally referred to as utility, can be assigned to each possible outcome, with the preferred course of action being that which has the highest expected utility. One of these axioms, the independence principle, is controversial, and is frequently violated in experimental situations. Proponents of the theory hold that these violations are irrational The independence principle is simply an axiom dictating consistency among preferences, in that it dictates that a rational agent should hold a specified preference given another stated preference. When applied to preferences between lotteries, the independence principle can be demonstrated to be a rule that is followed only when preferences are formed in a particular way. The logic of expected utility theory is that this demonstration proves that preferences should be formed in this way An alternative interpretation is that this demonstrates that the independence principle is not a valid general rule of consistency, but in particular, is a rule that must be followed if one is to consistently apply the decision rule "choose the lottery that has the highest expected utility." This decision rule must be justified on its own terms as a valid rule of rationality by demonstration that violation would lead to decisions that conflict with the decision maker's goals This rule does not appear to be suitable for medical decisions because often these are one-time decisions in which expectation, a long-run property of a random variable, would not seem to be applicable. This is particularly true for those decisions involving a non-trivial risk of death Key words. expected utility theory, von Neumann-Morgenstern utility, strength of preference; decision analysis; independence principle. (Med Decis Making 1996;16:1-6)

Suggested Citation

  • Brian J. Cohen, 1996. "Is Expected Utility Theory Normative for Medical Decision Making?," Medical Decision Making, , vol. 16(1), pages 1-6, February.
    • Handle: RePEc:sae:medema:v:16:y:1996:i:1:p:1-6
    DOI: 10.1177/0272989X9601600101
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    1. McClennen,Edward F., 1990. "Rationality and Dynamic Choice," Cambridge Books, Cambridge University Press, number 9780521360470, October.
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    1. Chen, Shihua & Chen, Yulin & Jebran, Khalil, 2021. "Trust and corporate social responsibility: From expected utility and social normative perspective," Journal of Business Research, Elsevier, vol. 134(C), pages 518-530.
    2. Z Hua & S Li & Z Tao, 2006. "A rule-based risk decision-making approach and its application in China's customs inspection decision," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 57(11), pages 1313-1322, November.

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