"...During this period there has been a growing awareness-stimulated in large part by Maurice Allais's work in the early 1950s-that people's reasoned judgments often violate the basic assumptions of expected utility. Numerous studies have demonstrated that such violations tend to follow systematic and predictable patterns. Investigators have therefore proposed alternative theories of rational preference that accommodate systematic departures from expected utility while retaining much of its mathematical elegance and computational convenience. With the notable exception of Allais's own theory from the early 1950s, most of the alternatives have emerged during the past decade.
This book attempts to make sense of recent and not so recent developments in preference theory for risky and uncertain decisions. It is arranged in two main parts: Chapters 1 through 6 focus on decision under risk, Chapters 7 through 9 on decision under uncertainty. Each main part answers three questions:
1. What is expected utility theory?
2. What is wrong with it from a rational preference perspective?
3. What has been proposed to correct the problems?
Question 1 is dealt with in Chapter 1 for decision under risk (von Neumann and Morgenstern) and in Chapter 7 for decision under uncertainty (Savage). Chapter 2 and the first part of Chapter 8 address question 2. Question 3 is partly answered by surveys of alternative theories of preference in risky situations (Chapter 3) and in uncertain situations (Chapter 8). These five chapters (1-3, 7-8) comprise a book within the book whose purpose is to provide an up-to-date view of expected utility and its alternatives that aims for organizational clarity and inclusiveness."