Abstract
Expected utility theory has dominated the analysis of decision making under risk. It has been generally accepted as a normative model of rational choice (Keeney and Raiffa, 1976), and widely applied as a descriptive model of economic behavior (e.g., Friedman and Savage, 1948, and Arrow, 1971). Thus, it is assumed that all reasonable people would wish to obey the axioms of the theory (von Neumann & Morgenstern, 1944, and Savage, 1954), and that most people actually do, most of the time.
Keywords
AxiomArrowNormativeExpected utility hypothesisSubjective expected utilityMathematical economicsDecision theoryVon Neumann architectureVon Neumann–Morgenstern utility theoremEconomicsPositive economicsComputer scienceEpistemologyMicroeconomicsMathematicsPhilosophy
Affiliated Institutions
Related Publications
Theory of games and economic behavior
This is the classic work upon which modern-day game theory is based. What began more than sixty years ago as a modest proposal that a mathematician and an economist write a shor...
Is the ex ante risk premium always positive?
This paper develops tests of inequality restrictions implied by conditional asset pricing models. The methodology is easy to implement, requires little knowledge of the conditio...
Refining the Risk Concept: Decision Context as a Factor Mediating the Relation Between Risk and Program Effectiveness
In meta-analyses of the rehabilitation literature, reoffending risk has been identified as a primary variable influencing program effectiveness. However, it is by no means clear...
Risk, Return, and Equilibrium: Empirical Tests
This paper tests the relationship between average return and risk for New York Stock Exchange common stocks. The theoretical basis of the tests is the "two-parameter" portfolio ...
An Intertemporal General Equilibrium Model of Asset Prices
This paper develops a continuous time general equilibrium model of a simple but complete economy and uses it to examine the behavior of asset prices. In this model, asset prices...
Publication Info
- Year
- 1988
- Type
- book-chapter
- Pages
- 183-214
- Citations
- 33001
- Access
- Closed
External Links
Social Impact
Altmetric
PlumX Metrics
Social media, news, blog, policy document mentions
Citation Metrics
33001
OpenAlex
Cite This
Daniel Kahneman,
Amos Tversky
(1988).
Prospect theory: An analysis of decision under risk.
Cambridge University Press eBooks
, 183-214.
https://doi.org/10.1017/cbo9780511609220.014
Identifiers
- DOI
- 10.1017/cbo9780511609220.014