expected utility theory (with John von Neumann)

E11182

decision theory economic theory mathematician normative theory of choice physicist theory of rational choice under risk

Expected utility theory (with John von Neumann) is a foundational framework in economics and decision theory that models how rational agents make choices under uncertainty by maximizing the expected value of a utility function.

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Observed surface forms (6)

Surface form	Occurrences
expected utility theory	0
John von Neumann	0
von Neumann–Morgenstern utility theorem	2
minimax theorem	1
von Neumann–Morgenstern expected utility theory	1
von Neumann–Morgenstern utility functions	1

Statements (49)

Predicate	Object
instanceOf	decision theory ⓘ economic theory ⓘ mathematician ⓘ normative theory of choice ⓘ physicist ⓘ theory of rational choice under risk ⓘ
appliesTo	choices among risky lotteries ⓘ decisions under risk ⓘ
assumes	agents have a utility function over outcomes ⓘ expected utility axiom ⓘ independence axiom ⓘ preferences are continuous ⓘ preferences over lotteries are complete ⓘ preferences over lotteries are transitive ⓘ
characterizes	rational choice under risk ⓘ
coauthored	Theory of Games and Economic Behavior ⓘ
contrastsWith	expected value maximization of monetary payoffs ⓘ
coreIdea	rational agents maximize expected utility rather than expected monetary value ⓘ
criticizedBy	prospect theory ⓘ
criticizedFor	inability to explain Allais paradox ⓘ inability to explain Ellsberg paradox ⓘ violations of independence axiom in empirical data ⓘ
describedIn	Theory of Games and Economic Behavior ⓘ
developedBy	John von Neumann ⓘ Oskar Morgenstern ⓘ
entails	risk attitudes are captured by curvature of utility function ⓘ
field	decision theory ⓘ economics ⓘ game theory ⓘ
formalizedBy	expected utility theory (with John von Neumann) self-linksurface differs ⓘ surface form: von Neumann–Morgenstern utility theorem
hasVariant	expected utility theory (with John von Neumann) self-linksurface differs ⓘ surface form: von Neumann–Morgenstern expected utility theory
implies	choices can be represented as maximization of expected utility ⓘ
influenced	finance theory ⓘ Theory of Games and Economic Behavior ⓘ surface form: game theory modern microeconomic theory ⓘ risk analysis ⓘ welfare economics ⓘ
influencedBy	Bernoulli’s theory of utility ⓘ
knownFor	co-founding expected utility theory ⓘ
mathematicalForm	EU(a)=Σ p_i u(x_i) over possible outcomes x_i with probabilities p_i ⓘ
publicationYear	1944 ⓘ
requires	cardinal utility up to positive affine transformations ⓘ
usedIn	cost–benefit analysis ⓘ expected utility maximization models in macroeconomics ⓘ insurance economics ⓘ portfolio choice theory ⓘ
usesConcept	lottery over outcomes ⓘ probability distribution over outcomes ⓘ utility function ⓘ

Referenced by (6)

Full triples — surface form annotated when it differs from this entity's canonical label.

Nash bargaining solution → assumes → expected utility theory (with John von Neumann) ⓘ

this entity surface form: von Neumann–Morgenstern utility functions

expected utility theory (with John von Neumann) → formalizedBy → expected utility theory (with John von Neumann) self-linksurface differs ⓘ

subject surface form: expected utility theory

this entity surface form: von Neumann–Morgenstern utility theorem

expected utility theory (with John von Neumann) → hasVariant → expected utility theory (with John von Neumann) self-linksurface differs ⓘ

subject surface form: expected utility theory

this entity surface form: von Neumann–Morgenstern expected utility theory

John von Neumann → knownFor → expected utility theory (with John von Neumann) ⓘ

this entity surface form: minimax theorem

John von Neumann → notableConcept → expected utility theory (with John von Neumann) ⓘ

this entity surface form: von Neumann–Morgenstern utility theorem

Oskar Morgenstern → theoryDeveloped → expected utility theory (with John von Neumann) ⓘ