Theory and Decision

, Volume 25, Issue 1, pp 25–78 | Cite as

Consequentialist foundations for expected utility

  • Peter J. Hammond
Article

Abstract

Behaviour norms are considered for decision trees which allow both objective probabilities and uncertain states of the world with unknown probabilities. Terminal nodes have consequences in a given domain. Behaviour is required to be consistent in subtrees. Consequentialist behaviour, by definition, reveals a consequence choice function independent of the structure of the decision tree. It implies that behaviour reveals a revealed preference ordering satisfying both the independence axiom and a novel form of sure-thing principle. Continuous consequentialist behaviour must be expected utility maximizing. Other plausible assumptions then imply additive utilities, subjective probabilities, and Bayes' rule.

Keywords

Expected utility subjective probability decision trees Bayes' rule consequentialist behaviour 

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Copyright information

© Kluwer Academic Publishers 1988

Authors and Affiliations

  • Peter J. Hammond
    • 1
  1. 1.Department of EconomicsStanford UniversityStanfordU.S.A.

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