Recent developments in modelling preferences under risk

Summary

Ever since von Neumann and Morgenstern presented their expected utility theory, the axioms (assumptions) underlying their theory have been intensely debated and tested. Recently, a variety of theories have been presented which model preferences by weakening some of the assumptions of expected utility theory. We describe some of these theories, examine their properties, and provide insights into how they work. Implications for different areas of business research are discussed.

Zusammenfassung

Seit von Neumann und Morgenstern die Erwartungsnutzentheorie vorgestellt haben, werden die dieser Theorie zugrunde liegenden Axiome (Annahmen) intensiv diskutiert. Während man in der Vergangenheit entweder für oder gegen die Theorie war, wurden in letzter Zeit eine Reihe von neuen Ansätzen vorgestellt, die die Erwartungsnutzentheorie durch Abschwächung der ursprünglichen Annahmen erweitern. Nach einer Darstellung der neuen Modelle der erweiterten Erwartungsnutzentheorie werden diese verglichen und bezüglich ihrer Anwendbarkeit in verschiedenen Gebieten der Betriebswirtschaftslehre untersucht.

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Weber, M., Camerer, C. Recent developments in modelling preferences under risk. OR Spektrum 9, 129–151 (1987). https://doi.org/10.1007/BF01721094

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Keywords

  • Utility Theory
  • Model Preference
  • Business Research
  • Expect Utility Theory