Author Question: Outline subjective expected utility theory. What will be an ideal ... (Read 111 times)

ec501234

  • Hero Member
  • *****
  • Posts: 573
Outline subjective expected utility theory.
 
  What will be an ideal response?

Question 2

What are the three main assumptions of the model of economic man and woman?
 
  What will be an ideal response?



Jadwiga9

  • Sr. Member
  • ****
  • Posts: 316
Answer to Question 1

According to subjective expected utility theory, the goal of human action is to seek pleasure and avoid pain. According to this theory, when people make decisions, they will seek to maximize pleasure (referred to as positive utility) and to minimize pain (referred to as negative utility). In doing so, however, we calculate two things. One is subjective utility, which is a calculation based on the individual's judged weightings of utility (value), rather than on objective criteria. The second is subjective probability, which is a calculation based on the individual's estimates of likelihood, rather than on objective statistical computations. The difference between this model and the former one is that the ratings and weights are subjective, whereas in the former model they are supposedly objective.

Answer to Question 2

Among the early models of decision making crafted in the 20th century was that of economic man and woman. This model assumed three things:
1 . Decision makers are fully informed regarding all possible options for their decisions and of all possible outcomes of their decision options.
2 . They are infinitely sensitive to the subtle distinctions among decision options.
3 . They are fully rational in regard to their choice of options.



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
 

Did you know?

The oldest recorded age was 122. Madame Jeanne Calment was born in France in 1875 and died in 1997. She was a vegetarian and loved olive oil, port wine, and chocolate.

Did you know?

Many medications that are used to treat infertility are injected subcutaneously. This is easy to do using the anterior abdomen as the site of injection but avoiding the area directly around the belly button.

Did you know?

Congestive heart failure is a serious disorder that carries a reduced life expectancy. Heart failure is usually a chronic illness, and it may worsen with infection or other physical stressors.

Did you know?

Sildenafil (Viagra®) has two actions that may be of consequence in patients with heart disease. It can lower the blood pressure, and it can interact with nitrates. It should never be used in patients who are taking nitrates.

Did you know?

The modern decimal position system was the invention of the Hindus (around 800 AD), involving the placing of numerals to indicate their value (units, tens, hundreds, and so on).

For a complete list of videos, visit our video library