Utility theory, in one form or another, has provided the guiding principle for prescribing and describing gambling decisions since the 18th century. The expected utility principle asserts that given a choice among gambles, the decision maker will select the one with the highest expected utility.
There are a number of ways other than choosing by which an individual can express his opinions about the utilities of various gambles. Among these are ratings of attractiveness, bids to buy, and bids to sell:
Ratings of attractiveness: On an arbitrary scale, S assigns an attractiveness value to each of a set of bets. For any pair, it is assumed that he prefers the one to which he gives the highest rating.
Bids to buy (B bids): E owns a set of bets. For each bet, S indicates the maximum amount of money he would pay to be able to play the bet (see Coombs, Bezembinder, & Goode, 1967; Lichtenstein, 1965). For any pair of bets, it is assumed that he prefers the one for which he bids the most money.
Bids to sell (S bids): S owns a set of bets. For each bet, S indicates the minimum amount for which he would sell the right to play the bet (see Becker, DeGroot, & Marschak, 1964; Coombs et al., 1967; Tversky, 1967b). For any pair it is assumed that S prefers the bet for which he demands the most money.
Because utility theory assumes that these different responses are all determined by the same underlying values, it predicts that Ss who are asked to choose one of two bets will choose the one for which they would make the higher bid or to which they would give the higher rating.