Axioms and Counterexamples Expected Utility Theory

Chapter 6 explained the relevance between the initial idea of expected utility theoryExpected utility theory and psychology and introduced some studies of utility measurementUtility measurement based on expected utility theoryExpected utility theory. This chapter will first explain the axiomatic systemAxiomatic system of expected utility theory, then how to approach the axiomatic systemAxiomatic system, with introduction of some counterexamples. A study of one theory of decision-making that derives a group of axiomsAxiom expressing decision-making[aut]Ichikawa, A. and[aut]Dhami, S. preference[aut]Edwards, W. relations[aut]Bell, D. E. (Barberà et al., 1998; Bell et al., 1988; Dhami, 2016; Edwards, 1992; Fishburn, 1988; Ichikawa, 1983; Iverson and Luce, 1998; von Neumann, J., & Morgenstern, 1944/1947); Savage, 1954; Tamura et al., 1997; Takemura, 2020). This[aut]Fishburn, P. C. approach[aut]Morgenstern, O. is[aut]Savage, L. J. an[aut]Tamura, H. axiomatic method that has been adopted by mathematical psychologists and mathematical economists, which is intended to develop a structure of theoretical studies to derive the small number of qualitative axiomsAxiom that underpin the quantitative models of decision-making. Empirical testing of the axiomsAxiom of decision theory supports the investigation of the essential characteristics of decision-making and preference relationsPreference relation. A group of axiomsAxiom has been studied empirically in the field of behavioral decision theoryBehavioral decision theory. Empirical examination of the axiomsAxiom of expected utility theoryExpected utility theory has produced some findings that cannot be fully supported: the Allais paradoxAllais paradox (Allais, 1953) and[aut]Allais, M. theEllsberg paradox Ellsberg paradox[aut]Ellsberg, D. (Ellsberg, 1961).