| 1. | Rabin criticizes this implication of expected utility theory on grounds of implausibility.
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| 2. | This defies conventional rationality behind subjective expected utility theory.
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| 3. | Theories of bounded rationality relax one or more assumptions of standard expected utility theory.
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| 4. | Recently, expected utility theory has been extended to arrive at more behavioral decision models.
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| 5. | Like any mathematical model, expected utility theory is an abstraction and simplification of reality.
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| 6. | Cumulative prospect theory is one popular generalization of expected utility theory that can predict many behavioral regularities.
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| 7. | Therefore, the validity of expected utility theory depends on the empirical validity of the independence axiom.
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| 8. | This differs from expected utility theory, in which a rational agent is indifferent to the reference point.
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| 9. | According to expected utility theory, the person should choose either 1A and 2A or 1B and 2B.
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| 10. | In expected utility theory, the individual does not care how the outcome of losses and gains are framed.
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