I think the non-intuitive nature of the A choice is because we naturally think of utilons as "things". For any valuable thing (money, moments of pleasure, whatever) anybody who is minimally risk adverse would choose B. But utllons are not things, they are abstractions defined by one's preferences. So that A is the rational choice is a tautology, in the standard versions of utility theory.

It may help to think it the other way around, starting from the actual preference. You would choose a 99.9% chance of losing ten cents and 0.1% chance of winning... (read more)


Also, it's well possible that your utility function doesn't evaluate to +10000 for any value of its argument, i.e. it's bounded above.

Open thread, January 25- February 1

by NancyLebovitz 1 min read25th Jan 2014318 comments


If it's worth saying, but not worth its own post (even in Discussion), then it goes here.