Viability of Utility Values in Decisions under Risk

摘要

Viability of utility values in decision making under risk and with high payoffs, where classical maximization of expected monetary value fails, is demonstrated. Building on von Neumann & Morgenstern''s utility axioms, an Excel spreadsheet method is described to develop an executive(s)''s utility function, which can be used for consistent decision making and to delegate decision making authority to subordinates. Also, the concept can be extended to derivation of a consensus utility function for a group of executives, which can be used to make decisions under risk at corporate levels.