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Expected Utility and Cognitive Consistency

Author

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  • Louis Lévy-Garboua

    (TEAM - Théories et Applications en Microéconomie et Macroéconomie - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

One may reason before making a decision on perceiving potential objections to expected utility-preference. Cognitive consistency is attained by making full use of available information, i.e. consistent preference and reasons. I show that coincidence between the rational choice and the normative preference requires perfect consciousness, and I provide maximizing rules of decision conditional on preference which are valid with imperfect consciousness. A necessary and sufficient condition for expected utility to be descriptively valid is given. Under risk, the rational choice converges towards expected utility through unconscious learning. Many well-known paradoxes and anomalies of choice, evaluation and information are solved for well-behaved preferences.

Suggested Citation

  • Louis Lévy-Garboua, 1999. "Expected Utility and Cognitive Consistency," Post-Print halshs-03674666, HAL.
    • Handle: RePEc:hal:journl:halshs-03674666
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-03674666
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    References listed on IDEAS

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    1. Wakker, P.P. & Thaler, R.H. & Tversky, A., 1997. "Probabilistic insurance," Other publications TiSEM 7532d1e7-187b-4418-95a1-9, Tilburg University, School of Economics and Management.
    2. Wakker, Peter P & Thaler, Richard H & Tversky, Amos, 1997. "Probabilistic Insurance," Journal of Risk and Uncertainty, Springer, vol. 15(1), pages 7-28, October.
    3. David E. Bell, 1982. "Regret in Decision Making under Uncertainty," Operations Research, INFORMS, vol. 30(5), pages 961-981, October.
    4. Machina, Mark J, 1987. "Choice under Uncertainty: Problems Solved and Unsolved," Journal of Economic Perspectives, American Economic Association, vol. 1(1), pages 121-154, Summer.
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    Cited by:

    1. André Lapidus, 2000. "La rationalité du choix passionnel : En quête de l'héritage de David Hume," Post-Print hal-00343939, HAL.
    2. Blondel, Serge, 2002. "Testing Theories of Choice under Risk: Estimation of Individual Functionals," Journal of Risk and Uncertainty, Springer, vol. 24(3), pages 251-265, May.
    3. Roth, Gerrit, 2006. "Predicting the Gap between Willingness to Accept and Willingness to Pay," Munich Dissertations in Economics 4901, University of Munich, Department of Economics.

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    More about this item

    Keywords

    doubt; cognitive consistency; reasons; information; consciousness; objection dependent expected utility; doute; cohérence cognitive; raisons; conscience; espérance d'utilité dépendante de l'objection;
    All these keywords.

    JEL classification:

    • D0 - Microeconomics - - General
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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