We investigate an extension of Dekel, Ely and Yilankaya's (2004) treatment of the evolution of preference to more general, possibly non-expected utility preferences. Along the lines of their analysis we consider a population of types that is repeatedly and randomly matched to play the mixed extension of any given symmetric two-player normal-form game with complete information. In our setup, a type is a generic best-response correspondence that is assumed to satisfy only standard assumptions. Preferences evolve according to the "success" of the player which is determined by the payoff she receives in the game. As in Dekel, Ely and Yilankaya (2004), the players observe the type of their opponent and a Nash equilibrium according to their best responses is played. We show that Dekel, Ely and Yilankaya's result that stability of an outcome implies efficiency is robust in this more general setup. However, in our model we obtain full equivalence between the two concepts for 2x2 games. We show that efficiency of any strategy also implies the stability of the outcome that it induces. This is in contrast to the former work in which only efficiency of a pure strategy leads to a stable outcome. The result implies the existence of a stable outcome in any 2x2 game. Considering the class of rank-dependent expected utility preferences as example we discuss the model's ability to embed specific types of non-expected utility theories. Moreover, we study implications for well-established games like the prisoner's dilemma. -- Evolution von Präferenzen ; Nicht-Erwartungsnutzentheorie ; Beste-Antwort-Korrespondenz ; Stabilität ; Effizienzstrategie ; Evolution of Preferences ; Non-Expected Utility Theory ; Best-Response Correspondence ; Stability ; Efficient Strategy

Economic analysis of choice under uncertainty has been dominated by the expected utility (EU) model, yet the EU model has never been without critics. Psychologists accumulated evidence that individual choices under uncertainty were inconsistent with the predictions of the EU model. Applied work in areas such as finance was dominated by the simpler mean-variance analysis. In the 1980s this skepticism was dispelled as a number of generalizations of EU were proposed, most of which were capable of explaining evidence inconsistent with EU, while preserving transitivity and dominance. Generalized expected utility is now a flourishing subfield of economics, with dozens of competing models and considerable literature exploring their theoretical properties and comparing their empirical performance. But the EU model remains the principal tool for the analysis of choice under uncertainty. There is a view that generalized models are too difficult to handle or incapable of generating sharp results. This creates a need to show that the new models can be used in the kinds of economic analysis for which EU has been used, and that they can yield new and interesting results. This book meets this need by describing one of the most popular generalized models -- the rank-dependent expected utility model (RDEU), also known as anticipated utility, EU with rank-dependent preferences, the dual theory of choice under uncertainty, and simply as rank-dependent utility. As the many names indicate, the model has been approached in many ways by many scientists and for this reason, consideration of a single model sheds light on many of the concerns that have motivated the development of generalized utility models. The popularity of the RDEU model rests on its simplicity and tractability. The standard tools of analysis developed for EU theory may be applied to the RDEU model, but since RDEU admits behavior inconsistent with EU, the field of potential applications is widened. As such, the RDEU model is not as much a competitor to EU as an extension based on less restrictive assumptions.

The theory on the evolution of preferences deals with the endogenous formation of preference relations in strategic situations. It is related to the field of evolutionary game theory. In this book we analyze the role and the influence of general, possibly non-expected utility preferences in such an evolutionary setup. In particular, we demonstrate that preferences which diverge from von Neumann-Morgenstern expected utility may potentially prove to be successful under evolutionary pressures.

The need to understand the theories and applications of economic and finance risk has been clear to everyone since the financial crisis, and this collection of original essays proffers broad, high-level explanations of risk and uncertainty. The economics of risk and uncertainty is unlike most branches of economics in spanning from the individual decision-maker to the market (and indeed, social decisions), and ranging from purely theoretical analysis through individual experimentation, empirical analysis, and applied and policy decisions. It also has close and sometimes conflicting relationships with theoretical and applied statistics, and psychology. The aim of this volume is to provide an overview of diverse aspects of this field, ranging from classical and foundational work through current developments. - Presents coherent summaries of risk and uncertainty that inform major areas in economics and finance - Divides coverage between theoretical, empirical, and experimental findings - Makes the economics of risk and uncertainty accessible to scholars in fields outside economics

Utility theory or, value theory in general, is certainly the cornerstone of decision theory, game theory, microecon~mics, and all social and political theories which deal with public decisions. Recently the American School of utility, founded by von N eumann Morgenstern, encountered a far-going criticism by the French School of utility represented by its founder Allais. The whole basis of the theory of decisions involving risk has been shaken and put into question. Consequently, basic research in the fundamentals of utility and value theory evolved into a crisis. Like any crisis in basic research, and this one was not an exception, it was very fruitful. One may simply say: Allais versus von Neumann-Morgenstern, or the French School of utility versus the American School, became one of the battlefields of scientific development which proved to be a most creative source of new advances and new developments in all those sciences which are based on evaluation of utilities.

The Conference on "Utility: Theories, Measurements, and Applications" met at the Inn at Pasatiempo in Santa Cruz, California, from June II to 15, 1989. The all-star cast of attendees are listed as authors in the Table of Contents of this book (see p. V), except for Soo Hong Chew and Amos Tversky. The purpose of the conference, and of National Science Foundation Grant No. SES-8823012 that supported it, was to confront proponents of new generalized theories of utility with leading decision analysts com mitted to the implementation, in practice, of the more traditional theory that these new theories reject. That traditional model is variously iden tified in this book as expected utility or subjectively expected utility maximization (EU or SEU for short) and variously attributed to von Neumann and Morgenstern or Savage. I had feared that the conference might consist of an acrimonious debate between Olympian normative theorists uninterested in what people actually do and behavioral modelers obsessed with the cognitive illusions and uninterested in helping people to make wise decisions. I was entirely wrong. The conferees, in two dramatic straw votes at the open ing session, unanimously endorsed traditional SEU as the appropriate normative model and unanimously agreed that people don't act as that model requires. (These votes had a profound impact on my thinking; detail about them and about that impact is located in Chapter 10.

The aim of this encyclopedia is to provide a comprehensive reference work on scientific and other scholarly research on the quality of life, including health-related quality of life research or also called patient-reported outcomes research. Since the 1960s two overlapping but fairly distinct research communities and traditions have developed concerning ideas about the quality of life, individually and collectively, one with a fairly narrow focus on health-related issues and one with a quite broad focus. In many ways, the central issues of these fields have roots extending to the observations and speculations of ancient philosophers, creating a continuous exploration by diverse explorers in diverse historic and cultural circumstances over several centuries of the qualities of human existence. What we have not had so far is a single, multidimensional reference work connecting the most salient and important contributions to the relevant fields. Entries are organized alphabetically and cover basic concepts, relatively well established facts, lawlike and causal relations, theories, methods, standardized tests, biographic entries on significant figures, organizational profiles, indicators and indexes of qualities of individuals and of communities of diverse sizes, including rural areas, towns, cities, counties, provinces, states, regions, countries and groups of countries.

Utility is a key concept in the economics of individual decision-making. However, utility is not measurable in a straightforward way. As a result, from the very beginning there has been debates about the meaning of utility as well as how to measure it. This book is an innovative investigation of how these arguments changed over time. Measuring Utility reconstructs economists' ideas and discussions about utility measurement from 1870 to 1985, as well as their attempts to measure utility empirically. The book brings into focus the interplay between the evolution of utility analysis, economists' ideas about utility measurement, and their conception of what measurement in general means. It also explores the relationships between the history of utility measurement in economics, the history of the measurement of sensations in psychology, and the history of measurement theory in general. Finally, the book discusses some methodological problems related to utility measurement, such as the epistemological status of the utility concept and its measures. The first part covers the period 1870-1910, and discusses the issue of utility measurement in the theories of Jevons, Menger, Walras and other early utility theorists. Part II deals with the emergence of the notions of ordinal and cardinal utility during the period 1900-1945, and discusses two early attempts to give an empirical content to the notion of utility. Part III focuses on the 1945-1955 debate on utility measurement that was originated by von Neumann and Morgenstern's expected utility theory (EUT). Part IV reconstructs the experimental attempts to measure the utility of money between 1950 and 1985 within the framework provided by EUT. This historical and epistemological overview provides keen insights into current debates about rational choice theory and behavioral economics in the theory of individual decision-making and the philosophy of economics.

This handbook in two parts covers key topics of the theory of financial decision making. Some of the papers discuss real applications or case studies as well. There are a number of new papers that have never been published before especially in Part II.Part I is concerned with Decision Making Under Uncertainty. This includes subsections on Arbitrage, Utility Theory, Risk Aversion and Static Portfolio Theory, and Stochastic Dominance. Part II is concerned with Dynamic Modeling that is the transition for static decision making to multiperiod decision making. The analysis starts with Risk Measures and then discusses Dynamic Portfolio Theory, Tactical Asset Allocation and Asset-Liability Management Using Utility and Goal Based Consumption-Investment Decision Models.A comprehensive set of problems both computational and review and mind expanding with many unsolved problems are in an accompanying problems book. The handbook plus the book of problems form a very strong set of materials for PhD and Masters courses both as the main or as supplementary text in finance theory, financial decision making and portfolio theory. For researchers, it is a valuable resource being an up to date treatment of topics in the classic books on these topics by Johnathan Ingersoll in 1988, and William Ziemba and Raymond Vickson in 1975 (updated 2 nd edition published in 2006).