Template-Type:ReDIF-Paper 1.0  
Title: Reconciliation with the Utility of Chance by Elaborated Outcomes
   Destroys the Axiomatic Basis of Expected Utility Theory
Author-Name: Pope, Robin
Classification-JEL: D81
Keywords: Utility of chance, elaborated outcomes, axiomatised expected utility theory,
   representation theorem
Abstract: Expected utility theory does not directly deal with the utility of chance. It has
   been suggested in the literature (Samuelson 1952, Markowitz 1959) that this can be
   remedied by an approach which explicitly models the emotional consequences
   which give rise to the utility of chance. We refer to this as the elaborated outcomes
   approach. 
   It is argued that the elaborated outcomes approach destroys the possibility of
   deriving a representation theorem based on the usual axioms of expected utility
   theory. This is shown with the help of an example due to Markowitz. It turns out
   that the space of conceivable lotteries over elaborated outcomes is too narrow to
   permit the application of the axioms. Moreover it is shown that a representation
   theorem does not hold for the example.
Length: pages
Creation-Date: 1999-02
Revision-Date: 
Handle: RePEc:bon:bonsfb:449