Biases from omitted risk effects in standard gamble utilities

Expected utility versus the changes in knowledge ahead

“…But as Bell (1981) and Loomes and Sugden (1982) implicitly assert, and as explicitly addressed and proved in Pope (1983Pope ( , 1984Pope ( , 2000Pope ( , 2004, von Neumann and Morgenstern had the correct interpretation, namely that EUT excludes secondary satisfactions. Including secondary satisfactions in EUT destroys its axiomatic base of EUT.…”

Managed Floats to Damp World-Wide Exchange Rate Liquidity Shocks Like 1982-5, 2006-9: Field and Laboratory Evidence for the Benefits of a Single World Currency

“…These certainty effects (e.g. satisfaction from complete safety, security) are excluded under the Ramsey version of EUT, but are included (along with illusory ones) under the Friedman and Savage version of EUT [161].…”

“…56, 62-66], and in effect extended in [47,48,161]. In the case of the Banque, the costs of this uncertainty (the negative secondary satisfactions) are the higher than otherwise interest levels and shortage of funds of its stakeholders (through some of them speculating against the French franc).…”

Incorporating feelings related to the uncertainty about future health in utility measurement

“…The uncertainty may introduce positive feelings 'because people are curious, having a love of suspense, nervous tension, excitement, danger, and would otherwise be bored, or because they are fired by hope; or negative emotions because they like certainty, hating excitement, which stresses them as they become filled with anxiety, worries and fear; or both positive and negative emotions' (Pope, 1995). Pope (2004) calls the satisfactions and dissatisfactions associated with the probabilistic knowledge of an event or its wisdom secondary satisfactions.…”

“…Incorporating secondary satisfactions in the outcomes of the gamble would destroy expected utility theory's axiomatic base (Pope, 2004). Therefore, the approach presented here uses a series of certainty equivalent questions to value each period's health and its distribution from the perspective of today.…”