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In decision theory, the Ellsberg paradox (or Ellsberg's paradox) is a paradox in which people's decisions are inconsistent with subjective expected utility theory. John Maynard Keynes published a version of the paradox in 1921. [1] Daniel Ellsberg popularized the paradox in his 1961 paper, "Risk, Ambiguity, and the Savage Axioms". [2]
Risk aversion implies that their utility functions are concave and show diminishing marginal wealth utility. The risk attitude is directly related to the curvature of the utility function: risk-neutral individuals have linear utility functions, risk-seeking individuals have convex utility functions, and risk-averse individuals have concave ...
The Friedman–Savage utility function is the utility function postulated in the theory that Milton Friedman and Leonard J. Savage put forth in their 1948 paper. [1] They argued that the curvature of an individual's utility function differs based upon the amount of wealth the individual has.
The managerial grid model or managerial grid theory (1964) is a model, developed by Robert R. Blake and Jane Mouton, of leadership styles. [1] This model originally identified five different leadership styles based on the concern for people and the concern for production. The optimal leadership style in this model is based on Theory Y.
The Vroom–Yetton contingency model is a situational leadership theory of industrial and organizational psychology developed by Victor Vroom, in collaboration with Philip Yetton (1973) and later with Arthur Jago (1988). The situational theory argues the best style of leadership is contingent to the situation.
The mythological Judgement of Paris required selecting from three incomparable alternatives (the goddesses shown).. Decision theory or the theory of rational choice is a branch of probability, economics, and analytic philosophy that uses the tools of expected utility and probability to model how individuals would behave rationally under uncertainty.
In decision theory, subjective expected utility is the attractiveness of an economic opportunity as perceived by a decision-maker in the presence of risk.Characterizing the behavior of decision-makers as using subjective expected utility was promoted and axiomatized by L. J. Savage in 1954 [1] [2] following previous work by Ramsey and von Neumann. [3]
The main modification to prospect theory is that, as in rank-dependent expected utility theory, cumulative probabilities are transformed, rather than the probabilities themselves. This leads to the aforementioned overweighting of extreme events which occur with small probability, rather than to an overweighting of all small probability events.