Difference between revisions of "Expected utility"

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{{wikilink|Expected utility hypothesis}}
 
{{wikilink|Expected utility hypothesis}}
 
 
'''Expected utility''' is the [[expected value]] of a [[utility function]].
 
'''Expected utility''' is the [[expected value]] of a [[utility function]].
  

Revision as of 04:15, 19 October 2009

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Expected utility is the expected value of a utility function.

Von Neumann and Morgenstern proved the expected utility theorem, which says that when a rational agent chooses between different "gambles" (probability distributions over outcomes), the utility of such a gamble can always be seen as the expected utility of the gamble's outcome.

Humans, of course, are a different story.

See also