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Nonexpected Utility Theories

Medical treatments offer health prospects. A health prospect represents a course of action with respect to one's health for which the outcome is generally uncertain. A surgery, initiation of a pharmaceutical treatment, and an exercise program are examples of health prospects. For simplicity of exposition, this entry considers only binary prospects, prospects involving two outcomes. Such binary prospects are all that is needed to measure health utility. Figure 1 shows a health prospect [.45: 24; 2] that offers different survival durations, 24 years and 2 years with associated probabilities .45 and .55 = −.45.

When utilities are known, it is a widely held view that expected utility is normative and is thus the appropriate approach for assigning value to a prospect such as that in ...

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