A derivation of expected utility maximization in the context of a game

I. GILBOA, D. Schmeidler

Games and Economic Behavior

July 2003, vol. 44, n°1, pp.172-182

Departments: Economics & Decision Sciences, GREGHEC (CNRS)

A decision maker faces a decision problem, or a game against nature. For each probability distribution over the state of the world (nature's strategies), she has a weak order over her acts (pure strategies). We formulate conditions on these weak orders guaranteeing that they can be jointly represented by expected utility maximization with respect to an almost-unique state-dependent utility, that is, a matrix assigning real numbers to act-state pairs. As opposed to a utility function that is derived in another context, the utility matrix derived in the game will incorporate all psychological or sociological determinants of well-being that result from the very fact that the outcomes are obtained in a given game