SSB and weighted linear utility as expected utility with suspicion. (English) Zbl 0729.90031

Bordley, Robert; Hazen, Gordon B.

Manage. Sci. 37, No. 4, 396-408 (1991).

Summary: We show that a “suspicious” subjective expected utility (SEU) maximizer, i.e., one who treats potential consequences of states as information useful in assessing the probability of those states, may under reasonable circumstances act as though he were maximizing either weighted linear utility, or skew-symmetric bilinear utility. SEU with suspicion, therefore, explains at least as many empirical violations of SEU theory as do these and similar models. We give examples to illustrate how several important types of SEU violations may seem to arise when suspicion is present.

MSC:

91B16	Utility theory
91B06	Decision theory
91B08	Individual preferences

Keywords:

subjective expected utility; skew-symmetric bilinear utility