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Created by steven0461 at 3y

A rational decision maker will, when presented with a choice, take the action with the greatest expected utility. Von Neumann and Morgenstern provided [http://en.wikipedia.org/wiki/Von_Neumann%E2%80%93Morgenstern_utility_theorem#The_axioms| 4 basic axioms of rationality]. They also proved the expected utility theorem, which states a rational agent ought to have preferences that maximize his total utility. Humans often deviate from rationality due to inconsistent preferences or the existence of ~~cognitive biases ~~cognitive biases.

A rational decision maker will, when presented with a choice, take the action with the greatest expected utility. Von Neumann and Morgenstern provided [http://en.wikipedia.org/wiki/Von_Neumann%E2%80%93Morgenstern_utility_theorem#The_axioms| 4 basic axioms of rationality]. ~~Under these axioms, they~~They also proved the expected utility theorem, which ~~says that exists a utility function defined on possible outcomes and every decision maker's preferences are characterized by maximizing the expected value of the function. The ~~~~expected utility hypothesis~~~~ holds that these axioms truly model the notion of~~states a rational ~~agent. Either way, humans~~agent ought to have preferences that maximize his total utility. Humans often deviate from rationality due to inconsistent preferences or the existence of cognitive biases cognitive biases.

A rational decision maker will, when presented with a choice, take the action with the greatest expected utility. Von Neumann and Morgenstern provided [http://en.wikipedia.org/wiki/Von_Neumann%E2%80%93Morgenstern_utility_theorem#The_axioms| 4 basic axioms of rationality]. Under these axioms, they proved the expected utility theorem, which says that exists a utility function defined on possible outcomes and every decision maker's preferences are characterized by maximizing the expected value of the function. The expected utility hypothesis holds that these axioms truly model the notion of a rational agent. Either way, humans often deviate from ~~ratinality by committing~~rationality due to inconsistent preferences or the existence of cognitive biases cognitive biases.

A rational decision maker will, when presented with a choice, take the action with the greatest expected utility. Von Neumann and Morgenstern provided [http://en.wikipedia.org/wiki/Von_Neumann%E2%80%93Morgenstern_utility_theorem#The_axioms| 4 basic axioms of rationality]. Under ~~this~~these axioms, they proved the expected utility theorem, which says that~~ there~~ exists a utility function defined on possible outcomes and every decision maker's preferences are characterized by maximizing the expected value of the function. The expected utility hypothesis holds that ~~this~~these axioms truly model the notion of a rational agent. Either way, humans often deviate from ratinality by committing cognitive biases.

A rational decision maker will, when presented with a choice, take the action with the greatest expected utility. Von Neumann and Morgenstern provided [http://en.wikipedia.org/wiki/Von_Neumann%E2%80%93Morgenstern_utility_theorem#The_axioms| 4 basic axioms of rationality]. Under this axioms, they proved the expected utility theorem, which says that there exists a utility function defined on possible outcomes and every decision maker's preferences are characterized by maximizing the expected value of the function. The ~~| ~~expected utility hypothesis holds that this axioms truly model the notion of a rational agent. Either way, humans often deviate from ratinality by committing cognitive biases.

A rational decision maker will, when presented with a choice, take the action with the greatest expected utility. Von Neumann and Morgenstern provided [http://en.wikipedia.org/wiki/Von_Neumann%E2%80%93Morgenstern_utility_theorem#The_axioms| 4 basic axioms of rationality]. Under this axioms, they proved the expected utility theorem, which says that there exists a utility function defined on possible outcomes and every decision maker's preferences are characterized by maximizing the expected value of the function. The | expected utility hypothesis holds that this axioms truly model the notion of a rational agent. Either way, humans often deviate from ratinality by committing ~~| ~~cognitive biases.

A rational decision maker will, when presented with a choice, take the action with the greatest expected utility. Von Neumann and Morgenstern provided [http://en.wikipedia.org/wiki/Von_Neumann%E2%80%93Morgenstern_utility_theorem#The_axioms| 4 basic axioms of rationality]. Under this axioms, they proved the expected utility theorem, which says that there exists a utility function defined on possible outcomes and every decision maker's preferences are characterized by maximizing the expected value of the function. The | expected utility hypothesis holds that this axioms truly model the notion of a rational agent. Either way, humans often deviate from ratinality by committing ~~[[bias]~~|cognitive ~~biases]~~biases.

A rational decision maker will, when presented with a choice, take the action with the greatest expected utility. Von Neumann and Morgenstern provided [http://en.wikipedia.org/wiki/Von_Neumann%E2%80%93Morgenstern_utility_theorem#The_axioms| 4 basic axioms of rationality]. Under this axioms, they proved the expected utility theorem, which says that ~~when~~there exists a utility function defined on possible outcomes and every decision maker's preferences are characterized by maximizing the expected value of the function. The | expected utility hypothesis holds that this axioms truly model the notion of a rational ~~agent chooses between different "gambles" (probability distributions over outcomes), the utility of such a gamble can always be seen as the expected utility of the gamble's outcome.~~

~~Humans, of course, are a different story.~~agent. Either way, humans often deviate from ratinality by committing [[bias]|cognitive biases].

**Expected utility** is the expected value in terms of the utility produced by an action. ~~Each possible consequence~~It is the sum of the ~~action is assigned a ~~utility of each of its possible consequences, individually weighted by ~~a ~~~~utility function~~~~ and weighed by the~~their respective probability of ~~that outcome occurring. The sum of these weighed utilities is defined to be the action's expected utility.~~occurrence.

**Expected utility** is the expected value in terms of the utility produced by an action. Each possible consequence of the action is assigned a utility by a utility function~~.~~ and weighed by the probability of that outcome occurring. The sum of these weighed utilities is defined to be the action's expected utility.

~~"~~**Expected utility" just meansutility** is the expected value of a utility function.

steven0461 v1.0.0Aug 28th 2009 (+466) Created page with '{{wikilink|Expected utility hypothesis}} "Expected utility" just means the [[expected value]] of a [[utility function]]. Von Neumann and Morgenstern proved the [http://www.econ...' 2

"Expected utility" just means the expected value of a utility function.

Von Neumann and Morgenstern proved the expected utility theorem, which says that when a rational agent chooses between different "gambles" (probability distributions over outcomes), the utility of such a gamble can always be seen as the expected utility of the gamble's outcome.

Humans, of course, are a different story.

A rational decision maker will, when presented with a choice, take the action with the greatest expected utility. Von Neumann and Morgenstern provided

~~[~~~~http://en.wikipedia.org/wiki/Von_Neumann%E2%80%93Morgenstern_utility_theorem#The_axioms~~~~|~~4 basic axioms of~~rationality]~~rationality. They also proved the expected utility theorem, which states a rational agent ought to have preferences that maximize his total utility. Humans often deviate from rationality due to inconsistent preferences or the existence of cognitive biases.