Expected Utility Theory

Expected utility theory (EUT) states how an EUT decision maker makes choices among options that have specified characteristics. Each option is in some sense viewed by the EUT decision maker as beneficial to the EUT decision maker, but the option also has risks associated with the benefits and the EUT decision maker must bear the adverse outcomes associated with these risks should they occur. In addition, both the benefits and the risks of the options are uncertain, hence EUT decision makers must consider a set of uncertainties of benefits and risks among options (or alternatives) as they make their way through the decisions they face. Compared with other types of decision makers who pursue different routes in coming to a choice among alternatives with trade-offs, ...

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