Expected Utility Theory is a fundamental concept in economics and decision theory that models how rational agents make choices under uncertainty by maximizing their expected utility. It assumes that individuals have consistent preferences and can assign a utility value to each possible outcome, allowing them to calculate the expected utility of different options and choose the one with the highest value.

Expected Utility Theory

fundamental concept in economics

Decision theory is a framework for making logical choices in the face of uncertainty, integrating principles from statistics, economics, and psychology to evaluate and optimize decisions. It encompasses both normative theories, which prescribe how decisions should be made, and descriptive theories, which describe how decisions are actually made by individuals and organizations.

decision theory

Rational agents are entities that make decisions aimed at maximizing their expected utility, based on the information available and their goals. They are a foundational concept in artificial intelligence and economics, where they are used to model decision-making processes in uncertain environments.

rational agents

choices under uncertainty

Maximizing expected utility

consistent preferences

Utility value refers to the perceived usefulness of a task or activity in achieving one's goals, significantly influencing motivation and engagement. It is a critical factor in educational psychology, where understanding and enhancing the utility value of learning activities can lead to improved student outcomes.

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