Aligning Theory with Behavior

In This Chapter

  • Quantifying our preferences
  • Distinguishing theory from behavior
  • Making sense of risk attitudes
  • Understanding why losing hurts
  • Misreading probabilities

I have frequently mentioned how the payoffs in games—which represent monetary or other outcomes—are often measured as utilities. This chapter further explores what utilities really measure and how they work.

This chapter also considers the ways people’s appraisal of expected payoffs and their behavior in game situations either holds to or deviates from standard utility theory.

Utility Theory

It’s time to get this nebulous idea of “utility” ...

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