Reconciliation with the Utility of Chance by Elaborated Outcomes Destroys the Axiomatic Basis of Expected Utility Theory
 Robin Pope
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Expected utility theory does not directly deal with the utility of chance. It has been suggested in the literature (Samuelson, 1952, Markowitz, 1959) that this can be remedied by an approach which explicitly models the emotional consequences which give rise to the utility of chance. We refer to this as the elaborated outcomes approach. It is argued that the elaborated outcomes approach destroys the possibility of deriving a representation theorem based on the usual axioms of expected utility theory. This is shown with the help of an example due to Markowitz. It turns out that the space of conceivable lotteries over elaborated outcomes is too narrow to permit the application of the axioms. Moreover it is shown that a representation theorem does not hold for the example.
 Title
 Reconciliation with the Utility of Chance by Elaborated Outcomes Destroys the Axiomatic Basis of Expected Utility Theory
 Journal

Theory and Decision
Volume 49, Issue 3 , pp 223234
 Cover Date
 200011
 DOI
 10.1023/A:1026520128623
 Print ISSN
 00405833
 Online ISSN
 15737187
 Publisher
 Kluwer Academic Publishers
 Additional Links
 Topics
 Keywords

 Utility of chance
 Elaborated outcomes
 Axiomatised expected utility theory
 Representation theorem
 Industry Sectors
 Authors

 Robin Pope ^{(1)}
 Author Affiliations

 1. Department of Economics, University of Tennessee, 508 Stokely Management Center, Knoxville, Tennessee, 379960550, USA