Von Neumann-Morgenstern Utilities, Risk Taking, and Welfare
Von Neumann and Morgenstern (1953, p. 28) have made it very clear that their utility theory disregards the utility (or the disutility) of the act of gambling itself. It seems to me that the utility functions defined by their theory have often been misinterpreted by paying insufficient attention to this fact. The purpose of this paper is to suggest a more adequate interpretation of von Neumann-Morgenstern (vNM) utility functions.
KeywordsUtility Function Marginal Utility Lottery Ticket Process Utility Outcome Utility
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