A variety of generalized expected utility theories have arisen, most of which drop or relax the independence axiom.
12.
The point of these models was to allow a wider range of behavior than was consistent with expected utility theory.
13.
The main point Allais wished to make is that the independence axiom of expected utility theory may not be a valid axiom.
14.
Expected Utility Theory ( EUT ) poses a utility calculation linearly combining weights and values of the probabilities associated with various outcomes.
15.
The most influential theoretical approach is economic game theory ( i . e ., rational choice theory, expected utility theory ).
16.
Prospect theory is able to explain everything that the two main existing decision theories expected utility theory and rank dependent utility theory can explain.
17.
Bernoulli's paper was the first formalization of marginal utility, which has broad application in economics in addition to expected utility theory.
18.
This has led to the field of behavioral finance, which has produced deviations from expected utility theory to account for the empirical facts.
19.
The mathematical clarity of expected utility theory has helped scientists design experiments to test its adequacy, and to distinguish systematic departures from its predictions.
20.
However, that the same person ( who chose 1A alone or 2B alone ) would choose both 1A and 2B together is inconsistent with expected utility theory.
