distribution or random variable that may be important to the decision maker. In the
last section of this chapter, Section 3.6, the M-V model is again discussed very briefly.
The focus in that discussion is on the question of when do the M-V and EU decision
models coincide. The EU model is discussed next.
3.3 THE EXPECTED UTILITY APPROACH
Determining the ranking function for random variables in the expected utility (EU)
decision model is a two-step process. First, a utility function u(x), whose domain is the
set of possible outcomes that the random variables can yield, is determined. Various
properties of this utility function r ...
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