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Risk-Taking and Tie-Breaking
| Content Provider | Semantic Scholar |
|---|---|
| Copyright Year | 2018 |
| Abstract | Instrumental rationality is about taking the best means to one’s ends. According to the orthodoxy among decision theorists — expected utility theory (EUT) — taking the best means to one’s ends involves two sorts of evaluations: first, you must determine what your ends are, and to what extent you value them (information that is encoded in an agent’s utility function); second, you must determine how effective your means might be at realizing your ends (information that is encoded in the agent’s credence function). e value of an option is its expected utility: roughly, the weighted average of how good or bad its potential outcome might be, where the weights correspond to the agent’s credences in those outcomes resulting from its performance. According to orthodoxy, rational agents maximize expected utility. Some philosophers — notably, Lara Buchak [e.g. Buchak, ] — argue that EUT is unduly restrictive: it doesn’t appropriately take into account the agent’s attitude toward risk. EUT, effectively, treats agents as if they were risk-neutral in virtue of the fact that it only takes local features of a gamble into account. But, argues Buchak, it’s rationally permissible for agent’s to care about a gamble’s global features— the way its potential outcomes are situated in the space of possibilities (e.g., its minimum, its maximum, its variance, its spread, etc.) — in a way that EUT cannot properly accommodate. In response, Buchak defends risk-weighted expected utility theory (REUT), which generalizes EUT by adding a third parameter into the evaluation of a gamble’s subjective value. In addition to a utility function (representing how the agent values her ends) and a probability function (representing what the agent thinks might happen), REUT represents an agent’s attitude toward risk by attributing to her a risk function, r. Unlike EUT, which weights the value of each potential outcome by that outcome’s probability, REUT weights the value of each potential outcome by a function r of the probability of getting something at least as valuable. If r is convex, the value of outcomes above theminimumwill contribute less |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | http://www.mit.edu/~rdoody/RiskTakingTieBreakingREUT.pdf |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
