Book contents
- Frontmatter
- Contents
- Preface
- Introduction
- I OVERVIEW PAPER
- II CONCEPTIONS OF CHOICE
- 2 BOUNDED RATIONALITY, AMBIGUITY, AND THE ENGINEERING OF CHOICE
- 3 RATIONALITY AS PROCESS AND AS PRODUCT OF THOUGHT
- 4 NORMATIVE THEORIES OF DECISION MAKING UNDER RISK AND UNDER UNCERTAINTY
- 5 RISKY CHOICE REVISITED
- 6 BEHAVIORAL DECISION THEORY: PROCESSES OF JUDGMENT AND CHOICE
- 7 REPLY TO COMMENTARIES
- 8 RESPONSE MODE, FRAMING, AND INFORMATION-PROCESSING EFFECTS IN RISK ASSESSMENT
- 9 RATIONAL CHOICE AND THE FRAMING OF DECISIONS
- 10 SAVAGE REVISITED
- III BELIEFS AND JUDGMENTS ABOUT UNCERTAINTIES
- IV VALUES AND UTILITIES
- V AREAS OF APPLICATION
- Index
4 - NORMATIVE THEORIES OF DECISION MAKING UNDER RISK AND UNDER UNCERTAINTY
Published online by Cambridge University Press: 01 March 2011
- Frontmatter
- Contents
- Preface
- Introduction
- I OVERVIEW PAPER
- II CONCEPTIONS OF CHOICE
- 2 BOUNDED RATIONALITY, AMBIGUITY, AND THE ENGINEERING OF CHOICE
- 3 RATIONALITY AS PROCESS AND AS PRODUCT OF THOUGHT
- 4 NORMATIVE THEORIES OF DECISION MAKING UNDER RISK AND UNDER UNCERTAINTY
- 5 RISKY CHOICE REVISITED
- 6 BEHAVIORAL DECISION THEORY: PROCESSES OF JUDGMENT AND CHOICE
- 7 REPLY TO COMMENTARIES
- 8 RESPONSE MODE, FRAMING, AND INFORMATION-PROCESSING EFFECTS IN RISK ASSESSMENT
- 9 RATIONAL CHOICE AND THE FRAMING OF DECISIONS
- 10 SAVAGE REVISITED
- III BELIEFS AND JUDGMENTS ABOUT UNCERTAINTIES
- IV VALUES AND UTILITIES
- V AREAS OF APPLICATION
- Index
Summary
INTRODUCTION
Normative decision theory is the study of guidelines for right action. It involves the formulation and defense of principles of comparative evaluation and choice among competing alternatives, proposed as rules that individuals or societies ought to – or perhaps would want to – follow. It deals also with the implications of these principles both on an abstract level and in reference to particular types of decision situations. The general subject is vast since it covers numerous ethical and normative social theories developed during the past few millennia.
The aim of the present chapter is exceedingly narrow in view of the larger perspective of the subject. It is to discuss a comparatively recent episode in the history of normative decision theory that has been heavily influenced by eighteenth-century Enlightenment thought and the subsequent ascendency of rationalism and scientific method in the analysis of human behavior. The principals in this episode are, with few exceptions, twentieth-century mathematicians, economists, and statisticians. The exceptions include Daniel Bernoulli (1738), who proposed a theory to explain why choices of prudent individuals among risky monetary options often violate the principle of expected profit maximization, and the Rev. Thomas Bayes (1763), who helped to pioneer the notion of probability as a theory of rational degrees of belief.
The theory I wish to describe is most succinctly known as expected utility theory. This is actually a family of related theories that divide into two subfamilies differentiated by the phrases (Luce and Raiffa, 1957) “decision making under risk” and “decision making under uncertainty.”
- Type
- Chapter
- Information
- Decision MakingDescriptive, Normative, and Prescriptive Interactions, pp. 78 - 98Publisher: Cambridge University PressPrint publication year: 1988
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