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Expected utility theory from the frequentist perspective

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  • Tai-Wei Hu

Abstract

We present an axiomatization of expected utility from the frequentist perspective. It starts with a preference relation on the set of infinite sequences with limit relative frequencies. We consider three axioms parallel to the ones for the von Neumann–Morgenstern (vN–M) expected utility theory. Limit relative frequencies correspond to probability values in lotteries in the vN–M theory. This correspondence is used to show that each of our axioms is equivalent to the corresponding vN–M axiom in the sense that the former is an exact translation of the latter. As a result, a representation theorem is established: The preference relation is represented by an average of utilities with weights given by the relative frequencies. Copyright Springer-Verlag 2013

Suggested Citation

  • Tai-Wei Hu, 2013. "Expected utility theory from the frequentist perspective," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 53(1), pages 9-25, May.
    • Handle: RePEc:spr:joecth:v:53:y:2013:i:1:p:9-25
    DOI: 10.1007/s00199-009-0482-9
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    References listed on IDEAS

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    1. Kaneko, Mamoru & Kline, J. Jude, 2008. "Inductive game theory: A basic scenario," Journal of Mathematical Economics, Elsevier, vol. 44(12), pages 1332-1363, December.
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    Cited by:

    1. Mamoru Kaneko, 2019. "Expected Utility Theory with Probability Grids and Preference Formation," Working Papers 1902, Waseda University, Faculty of Political Science and Economics.
    2. Hu, Tai-Wei, 2014. "Unpredictability of complex (pure) strategies," Games and Economic Behavior, Elsevier, vol. 88(C), pages 1-15.
    3. Mamoru Kaneko, 2020. "Expected utility theory with probability grids and preference formation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 70(3), pages 723-764, October.
    4. Tsakas, Elias, 2014. "Rational belief hierarchies," Journal of Mathematical Economics, Elsevier, vol. 51(C), pages 121-127.
    5. Mamoru Kaneko, 2013. "Symposium: logic and economics—interactions between subjective thinking and objective worlds," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 53(1), pages 1-8, May.

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    More about this item

    Keywords

    Objective probability; Expected utility theory; Frequentist theory of probability; Decision theory; D80; D81;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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