Expected utility theory from the frequentist perspective

Tai Wei Hu*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

7 Scopus citations

Abstract

We present an axiomatization of expected utility from the frequentist perspective. It starts with a preference relation on the set of infinite sequences with limit relative frequencies. We consider three axioms parallel to the ones for the von Neumann-Morgenstern (vN-M) expected utility theory. Limit relative frequencies correspond to probability values in lotteries in the vN-M theory. This correspondence is used to show that each of our axioms is equivalent to the corresponding vN-M axiom in the sense that the former is an exact translation of the latter. As a result, a representation theorem is established: The preference relation is represented by an average of utilities with weights given by the relative frequencies.

Original languageEnglish (US)
Pages (from-to)9-25
Number of pages17
JournalEconomic Theory
Volume53
Issue number1
DOIs
StatePublished - May 1 2013

Keywords

  • Decision theory
  • Expected utility theory
  • Frequentist theory of probability
  • Objective probability

ASJC Scopus subject areas

  • Economics and Econometrics

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