A Case Study of the Application of Expected Utility Theory to Everyday Decision Making

Letong Guo

doi:10.54097/vq4sk493

Authors

Letong Guo

DOI:

https://doi.org/10.54097/vq4sk493

Keywords:

Rational decision making; limitations; revision and extension.

Abstract

This paper reviews the current state of research on the application of expected utility theory in daily decision-making and explores the effectiveness and limitations of the theory in different decision-making scenarios by systematically sorting out and deeply analyzing application cases in several fields. As a classical decision theory, the core of expected utility theory is to guide rational decision-making by assessing the expected utility values of different choices. This paper reviews the applied research on expected utility theory by scholars at home and abroad in recent years in various fields, such as consumer choice, financial investment, health management, environmental policy, etc., and reveals its role and shortcomings in explaining and predicting decision-making behavior. This paper argues that expected utility theory provides an important theoretical framework for understanding everyday decision-making, but its applicability in practical applications is constrained by a variety of factors. Future research needs to further explore the modifications and extensions of the theory to better adapt to complex and changing decision-making environments. Decision makers should consider situational factors, personal preferences and theoretical limitations in practical applications, and flexibly use expected utility theory for decision analysis. This paper not only deepens the understanding of expected utility theory, but also provides new directions and ideas for subsequent research, which is of great significance in guiding the actual decision-making process.

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