Expected Utility Hypothesis - its origin and development
Streszczenie
The following thesis introduces the origin of Expected Utility Hypothesis with its
historical background and describes its early development. In the first chapter,
the history and solutions to St. Petersburg Paradox are presented, as it is closely
related to the von Neumann-Morgenstern Expected Utility Theory which is the
core notion of the thesis. In the second chapter, Expected Utility Theory is
thoroughly analysed basing on the original publication of von Neumann and
Morgenstern (Von Neumann and Morgenstern, 1953). Their axiomatisation
together with the interpretation of the axioms concludes the first part of the
chapter. Next, the basic notions of decision theory utilising the concept of
expected utility is presented. Finally, the third chapter is devoted to the
presentation of Maurice Allais’s critique of the theory and the analysis of his
paradox with the brief description of modern psychological reason for Expected
Utility Theory violations.