Foundations of Utility and Risk Theory with Applications

In this volume we present some o~ the papers that were delivered at FUR-82 - the First International Con~erence on Foundations o~ Utility and Risk Theory in Oslo, June 1982. The purpose o~ the con~erence was to provide a ~orum within which scientists could report on interesting applications o~ modern decision theory and exchange ideas about controversial issues in the ~oundations o~ the theory o~ choice under un­ certainty. With that purpose in mind we have selected a mixture of applied and theoretical papers that we hope will appeal to a wide spectrum o~ readers ~rom graduate students in social science departments and business schools to people involved in making hardheaded decisions in business and government. In an introductory article Ole Hagen gives an overview o~ various paradoxes in utility and risk theory and discusses these in the light o~ scientific methodology. He concludes the article by calling ~or joint efforts to provide decision makers with warkable theories. Kenneth Arrow takes up the same issue on a broad basis in his paper where he discusses the implications o~ behavior under uncertainty for policy. In the theoretical papers the reader will ~ind attempts at de~initive Statements of the meaning o~ old concepts and suggestions for the adoption o~ new concepts. For instance, Maurice Allais discusses four di~ferent interpretations o~ the axioms o~ probability and explains the need ~or an empirical characterization o~ the concept of chance.

Table of Contents:
Opening Address.- Paradoxes and Their Solutions.- Behavior Under Uncertainty and Its Implications for Policy.- Frequency, Probability and Chance.- Utility Analysis from the Point of View of Model Building.- On Second Order Probabilities and the Notion of Epistemic Risk.- Expected Utility Theory Does Not Apply to All Rational Men.- Sure-Thing Doubts.- The Pre-Outcome Period and the Utility of Gambling.- Empirical Demonst:ation that Expected Utility Decision Analysis is Not Operational.- Risk Attitude Hypotheses of Utility Theory.- Probabilistic Forecasts: Some Results and Speculations.- The Supra-Additivity of Subjective Probability.- A Decision Analysis Model When the Substitution Principle is Not Acceptable.- Generalized Expected Utility Analysis and the Nature of Observed Violations of the Independence Axiom.- Use of Subjective Probabilities in Game Theory.- Bargaining and Rationality: A Discussion of Zeuthen’as Principle and Some Other Decision Rules.- Hotelling Utility Functions.- Cardinal Utility and Decision Making Under Uncertainty.- Decision Making with an Uncertain Utility Function.- Welfare Losses Arising from Increased Public Information, and/or the Opening of New Securities Markets: Examples of the General Theory of the Second Best.- Decision Making in Dynamic Environments.- The Economics of Organizational Design.- Indifference Spanning Analysis.- Evaluation of Oil Spill Combat Plans by Means of Multi-Criteria Decision Analysis.- Name Index.