Expected utility theory and medical decision making

The paper discusses evolution of the concept of risk in economics. History of probabilistic methods and approaches to risk and uncertainty analysis is considered. Expected utility theory, behavioral approaches, heuristic models and methods of neuroeconomics are analyzed. Author investigates stability of neoclassical program related to risk analysis and suggests further directions of development.

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Measuring Utility, Destabilizing EUT

Measuring Utility ◽

10.1093/oso/9780199372768.003.0017 ◽

2018 ◽

pp. 261-280

Author(s):

Ivan Moscati

Keyword(s):

Decision Making ◽

Behavioral Economics ◽

Expected Utility ◽

Utility Theory ◽

Expected Utility Theory ◽

Behavioral Models ◽

Decision Making Under Risk ◽

Utility Measurement ◽

Elicitation Methods ◽

Series Of Experiments

Chapter 16 shows how the validity of expected utility theory (EUT) was increasingly called into question between the mid-1960s and the mid-1970s and discusses how a series of experiments performed from 1974 to 1985 undermined the earlier confidence that EUT makes it possible to measure utility. Beginning in the mid-1960s, in a series of experiments seminal to the field later called behavioral economics, Sarah Lichtenstein, Paul Slovic, Amos Tversky, and others showed that decision patterns violating EUT are systematic. The new experimenters who engaged with the EUT-based measurement of utility from the mid-1970s, namely Uday Karmarkar, Richard de Neufville, Paul Schoemaker, and coauthors, showed that different elicitation methods to measure utility, which according to EUT should produce the same outcome, generate different measures. These findings contributed to destabilizing EUT, undermined the confidence in EUT-based utility measurement, and helped foster a blossoming of novel behavioral models of decision-making under risk.

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Deal or No Deal? Decision Making under Risk in a Large-Payoff Game Show

The American Economic Review ◽

10.1257/aer.98.1.38 ◽

2008 ◽

Vol 98 (1) ◽

pp. 38-71 ◽

Cited By ~ 213

Author(s):

Thierry Post ◽

Martijn J van den Assem ◽

Guido Baltussen ◽

Richard H Thaler

Keyword(s):

Decision Making ◽

Risk Aversion ◽

Prospect Theory ◽

Expected Utility ◽

Utility Theory ◽

Path Dependence ◽

Expected Utility Theory ◽

Decision Making Under Risk ◽

Game Show ◽

Dependent Choice

We examine the risky choices of contestants in the popular TV game show “Deal or No Deal” and related classroom experiments. Contrary to the traditional view of expected utility theory, the choices can be explained in large part by previous outcomes experienced during the game. Risk aversion decreases after earlier expectations have been shattered by unfavorable outcomes or surpassed by favorable outcomes. Our results point to reference-dependent choice theories such as prospect theory, and suggest that path-dependence is relevant, even when the choice problems are simple and well defined, and when large real monetary amounts are at stake. (JEL D81)

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Probability and Uncertainty in Economic Modeling

Voprosy Ekonomiki ◽

10.32609/0042-8736-2009-10-46-61 ◽

2009 ◽

pp. 46-61

Author(s):

I. Gilboa ◽

W. A. Postlewaite ◽

D. Schmeidler

Keyword(s):

Decision Making ◽

Probability Theory ◽

Expected Utility ◽

Subjective Probability ◽

Utility Theory ◽

Expected Utility Theory ◽

Economic Modeling ◽

New Approach ◽

Multiple Priors

The article considers the paradigm of subjective probability and expected utility theory with respect to their applications in the theory of decision-making. Advantages and shortcomings of Savage’s axiomatic in the subjective probability theory are analyzed, the models of beliefs formation are considered. The authors propose a new approach to the analysis of decision-making — a multiple priors model, where an agent attributes to each event not a single probability, but a range of probabilities.

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Adding Liver Stiffness Measurement to the Routine Evaluation of Hepatocellular Carcinoma Resectability Can Optimize Clinical Outcome

Ultraschall in der Medizin - European Journal of Ultrasound ◽

10.1055/s-0042-104648 ◽

2016 ◽

Vol 38 (05) ◽

pp. 515-522

Author(s):

Alessandro Cucchetti ◽

Matteo Cescon ◽

Antonio Colecchia ◽

Flavia Neri ◽

Alberta Cappelli ◽

...

Keyword(s):

Hepatocellular Carcinoma ◽

Decision Making ◽

Expected Utility ◽

Clinical Judgment ◽

Utility Theory ◽

Liver Stiffness ◽

Expected Utility Theory ◽

Liver Stiffness Measurement ◽

Decision Curve Analysis ◽

Risk Seeking

Abstract Purpose Liver stiffness (LS) has been shown to be of use in chronic liver disease patients but its utility in surgical judgment still needs to be proven. A decision-making approach was applied to evaluate whether LS measurement before surgery of hepatocellular carcinoma (HCC) can be useful in avoiding post-hepatectomy liver failure (PHLF). Materials and Methods Decision curve analysis (DCA) was applied to 202 HCC patients (2008 – 14) with LS measurement prior to hepatectomy to verify whether the occurrence of PHLF grades B/C should be reduced through a decision-making approach with LS. Results Within 90 days of surgery, 4 patients died (2 %) and grades B/C PHLF occurred in 29.7 % of cases. Ascites and/or pleural effusion, treatable with medical therapy, were the most frequent complications. DCA showed that using the “expected utility theory” LS measurement can reduce up to 39 % of cases of PHLF without the exclusion of any patient from surgery that duly undergoes an uncomplicated postoperative course. LS measurement does not add any information to normal clinical judgment for patients with a low (< 10 %) risk of PHLF. Conclusion LS measurement can determine a reduction of PHLF under “expected utility theory” fulfilment. However, the degree of PHLF can be minor and “risk seeking” individuals can accept such a risk on the basis of surgical benefits.

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The Expected Utility Theory and Measurement Theory of von Neumann and Morgenstern, 1944–1947

Measuring Utility ◽

10.1093/oso/9780199372768.003.0010 ◽

2018 ◽

pp. 147-162 ◽

Cited By ~ 3

Author(s):

Ivan Moscati

Keyword(s):

Decision Making ◽

Utility Function ◽

Expected Utility ◽

Utility Theory ◽

Theory Of Measurement ◽

Measurement Theory ◽

Expected Utility Theory ◽

Economic Behavior ◽

Utility Analysis ◽

Von Neumann

Chapter 9 discusses the axiomatic version of expected utility theory (EUT), a theory of decision-making under risk, put forward by John von Neumann and Oskar Morgenstern in their book Theory of Games and Economic Behavior (1944). EUT was a changing factor in the history of utility measurement. In fact, while discussions of the measurability of utility before 1944 focused on the utility used to analyze decision-making between risk-free alternatives, after that year, discussions centered on the utility used to analyze decision-making between risky alternatives. In Theory of Games, the nature of the cardinal utility function u featured in von Neumann and Morgenstern’s EUT, and its relationship with the riskless utility function U of previous utility analysis remained ambiguous. Von Neumann and Morgenstern also put forward an axiomatic theory of measurement, which presents some similarities with Stanley Smith Stevens’s measurement theory but had no immediate impact on utility analysis.

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