Kiran Lloyd: Sometimes you should take the lower expected value, riskier bet
Most of us are familiar with the decision rule which tells us to maximize expected utility. Very few are familiar with a generally weaker decision rule “don’t take stochastically dominated options“. This is called the “Stochastic Dominance Theory of Rationality” (SDTR).
Tarsney (2020) has presented a compelling case for SDTR. I extend his results slightly (proving that sometimes we should take lower expectation riskier bets), and also show how SDTR vindicates common sense intuitions in the Two-Envelope Paradox, And Pascal’s Wager.
Additional Information: Ockham will be held online via MS Teams during TT21. Please email alexander.read@philosophy.ox.ac.uk if you wish to attend.
