383-Fall11-Lec16 - Making Simple Decisions:" Utility...

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1 CMPSCI 383 Nov 3, 2011 Making Simple Decisions: Utility Theory
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2 Today ʼ s topics Maximum expected utility principle Utility and preferences: rational preferences Assessing utility Utility of money Risk averse Risk seeking What do humans do? Multiattribute utility functions Pure dominance Preference structure Decision networks
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3 Maximum Expected Utility Principle U(s) : utility of state s Expected utility of an action: MEU principle: formalizes the idea of “doing the right thing” EU ( a | e ) = P (Result( a ) = ʹ s | a , e ) U ( ʹ s ) ʹ s action = argmax a EU ( a | e ) Evidence observations
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4 Why Expected Utility? Why not sum of cubes? Or minimize worst-case loss? Why not just deal with preferences? Why should a utility function with the desired properties exist at all?
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5 Preferences (prefers A over B or is indifferent between them)
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6 Rational Preferences
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7 Rational Preferences contd.
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8 Maximizing Expected Utility Utility function is not unique: aU ( S )+ b, a>0
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9 Utility assessment
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10 Utility Scale
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Money You ʼ re on a game show. You have won a $1M prize. You are offered this gamble: Flip a coin: heads nothing; tails $2.5M What is the expected monetary value (EMV) of the gamble? .5($0) + .5($2.5M) = $1.25M What do you do? Utility is not directly proportional to EMV
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383-Fall11-Lec16 - Making Simple Decisions:" Utility...

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