nounMathematics & Economics
A predicted utility value for one of several options, calculated as the sum of the utility of every possible outcome each multiplied by the probability of its occurrence.
- This is the key insight of expected utility theory - expected values and expected utility do not rank alternative gambles the same way.
- Kitcher gives this claim some rigour by putting idealized, but reasonable, values on the probabilities and expected utilities of different strategies in the search for truth.
- Roemer argues that if individuals maximize their expected utility on the insurance market, they insure against states in which they have low marginal utility.
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