Utility of Gains and Losses
Measurement-Theoretical and Experimental Approaches
Psychology Press – 1999
Series: Scientific Psychology Series
This new monograph presents Dr. Luce's current understanding of the behavioral properties people exhibit (or should exhibit) when they make selections among alternatives and how these properties lead to numerical representations of those preferences. It summarizes, and places in historical perspective, the research Dr. Luce has done on utility theory for over 10 years. Included are axiomatic theoretical formulations, experiments designed to test individual assumptions, and analyses of the fit to bodies of data of numerical representations derived from the theory.
"Luce's direct and outspoken way of criticizing other works, without wasting time and paper on ineffectient diplomacy, is refreshing and stimulating. He often gives balanced descriptions of arguments counter to his own viewpoints….This book for the first time permits a study, from scratch, of Luce's fascinating paradigm for decision under uncertainty….This book has delivered mathematical psychology at its best. It will be a continuing source of inspiration for the next generation of reseachers in this area."
—Journal of Mathematical Psychology
"Luce gives a balanced account of the empirical literature, paying ample attention to studies and arguments that disagree with his own viewpoints. The wealth of studies discussed here makes the book a very useful reference….The book is mathematically rigorous, gives an extensive overview of the empirical literature, and is likely to serve as a source of inspiration for future research."
—Journal of Economic Literature
"This is a tremendous book that integrates Luce's very important recent theoretical and empirical research on choice under uncertainty with the work of other researchers. Beginning a decade ago, Luce began building a very sophisticated theoretical structure that integrates utility theory with the concept of 'joint receipt,' which essentially corresponds to the intuitive idea of receiving two valued items at the same time. In a series of works, culminating in this book, Luce has shown that reasonable properties of this superficially simple concept, in conjunction with somewhat more standard utility ideas, lead to exciting new theories of choice under uncertainty. Importantly, Luce not only develops these revolutionary theoretical ideas, but he tests them with students and colleagues. Anyone wanting to know about contemporary utility theories that are both theoretically and empirically grounded must read this book, as must anyone who will enjoy sharing the obvious delight in his work of an outstanding practitioner of the mathematical behavioral sciences."
"I believe this book will be a classic in decision making under uncertainty. Dr. Luce introduces a new paradigm for individual decision making under uncertainty that is an alternative to the well-known Savage paradigm. Its main features--repeatable events and conditional acts--often lead to more tractable models. This book shows the richness of results that can be derived within this new paradigm, which allows for event splitting effects and violations of accounting equations--the importance of which the field has only recently come to understand."
Leiden University, Leiden, Netherlands
"Luce provides a penetrating analysis of the axioms underlying human choice theory and a thorough review of the evidence. Most importantly, he illustrates the process of decomposing theories into testable properties that become the building blocks for better theories. His relentless desire to reformulate theories in response to evidence is what makes this an extraordinary book by an extraordinary scientist."
Ohio State University
Contents: Preface. Introduction. Basic Assumptions. Binary Gambles of Gains. Joint Receipt of Gains. General Gambles of Gains. Additive Utility Over Mixed Consequences. Additive Value Over Mixed Consequences. Concluding Comments. Appendices: Summary of Notations. Basic Behavioral Assumptions. PEST Procedure. Additive Conjoint Measurement. Major Definitions.