RSM341H1 Lecture Notes - Lecture 7: Astrological Sign, Expected Utility Hypothesis, Revealed Preference
Document Summary
February 28, 2020: main ideas, use utility to measure probability, use probability to measure utility, expected utility representation of preferences. A model of personalist probability: belief about states, utility function on consequences, when you observe choices, you may learn something about, beliefs are subjective, choices, utilities. What you learn depends on the menu. Revealed through choice: acts: are choices. Creates dependency between things you don"t care about to things you do care about. Care about consequences for their own sake: have value for own sake, care about them intrinsically, bob example. Acts: ask ann out before exam, ask ann out after exam. Bob does not care about states (ann"s astrological sign): cancer, not cancer, does not make him happier or unhappier. No: bob cares about whether ann says yes or no, askbefore(cancer)=no, beliefs: probability of cancer (p) and probability of not cancer (1-p, utility function: u(yes) and u(no)
