Behavioral Finance
Economics 437
Behavioral Finance
Expected Utility
Feb 9, 2017
Expected Utility Theory
 Von Neumann Morganstern – “objective”
expected utility using “lotteries”
 Savage – “subjective utility” (Keynes
“Treatise on Probability””
 Read Chapter 8, pp. 81 – 92, in Burton-Shah
Behavioral Finance
Expected Utility
Feb 9, 2017
Problems
 Allais Problem
 Savage’s Confusion
 Bounded Problem
Behavioral Finance
Expected Utility
Feb 9, 2017
The End
Behavioral Finance
Expected Utility
Feb 9, 2017