Abstract

SUNDGREN, David. Expected Utility from Multinomial Second-order Probability Distributions. Polibits [online]. 2010, n.42, pp.71-76. ISSN 1870-9044.

We consider the problem of maximizing expected utility when utilities and probabilities are given by discrete probability distributions so that expected utility is a discrete stochastic variable. As for discrete second-order distributions, that is probability distributions where the variables are themselves probabilities, the multinomial family is a reasonable choice at least if first-order probabilities are interpreted as relative frequencies. We suggest a decision rule that reflects the uncertainty present in distribution-based probabilities and utilities and we show an example of this rule in action with multinomial second-order distributions.

Keywords : Imprecise probability. second-order probability; discrete probability distributions; multinomial distributions; expected utilty.

        · text in English     · English ( pdf )