Expected Utility from Multinomial Second-order Probability Distributions

**Authors: **David
Sundgren

** **Polibits, 42,
pp. 71-75, 2010.

**
Abstract: **We consider the
problem of maximizing expected utility when utilities and probabilities are
given by discrete probability distributions so that expected utility is a
discrete stochastic variable. As for discrete second-order distributions, that
is probability distributions where the variables are themselves probabilities,
the multinomial family is a reasonable choice at least if first-order
probabilities are interpreted as relative frequencies. We suggest a decision
rule that reflects the uncertainty present in distribution-based probabilities
and utilities and we show an example of this rule in action with multinomial
second-order distributions.

**Keywords: **
Imprecise probability; second-order probability;
discrete probability distributions; multinomial distributions; expected utilty

**
PDF:** Expected
Utility from Multinomial Second-order Probability Distributions,
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