The Ockham Society (Wednesday - Week 1, TT21)
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.
Ockham Society Convenor: Steven Diggin | Ockham Society Webpage