The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Non-expected Utility Theory

  • Mark J. Machina
Reference work entry


Beginning with the work of Allais and Edwards in the early 1950s and continuing through the present, psychologists and economists have uncovered a growing body of evidence that individuals do not necessarily conform to many of the key assumptions or predictions of the expected utility model of choice under uncertainty, and seem to depart from this model in systematic and predictable ways. This has led to the development of alternative models of preferences over objectively or subjectively uncertain prospects, which seek to accommodate these systematic departures from the expected utility model while retaining as much of its analytical power as possible.


Allais Paradox Allais, M. Ambiguity aversion Asset demand theory Choquet expected utility model Common consequence effect Common ratio effect Comparative statics Ellsberg Paradox Expected utility hypothesis First-order stochastic dominance preference Independence Axiom Insurance Non-expected utility theory Objective vs. subjective uncertainty Regret theory Risk Risk aversion Stochastic dominance Transitivity Uncertainty von Neumann–Morgenstern utility function 

JEL Classifications

D1 D8 
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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Mark J. Machina
    • 1
  1. 1.