Developments in Non-Expected Utility Theory: The Hunt for a Descriptive Theory of Choice under Risk

TLDR

Since the 1950s, empirical evidence has shown systematic violations of expected utility, prompting extensive research to develop superior descriptive models of risk‑seeking behavior and inspiring new theoretical directions. The article reviews recent advances in non‑expected utility theory and evaluates alternative models for empirical performance and theoretical soundness. The authors conduct a literature review, categorize theories into conventional and non‑conventional, and evaluate them using laboratory and field data.

Abstract

This article reviews recent developments in the economic theory of individual decision making under risk. Since the 1950s it has been known that individual choices violate the standard model of expected utility in predictable ways. Considerable research effort has now been devoted to the project of developing a superior descriptive model. Following an overview of non-expected utility theories which distinguishes between “conventional” and “non-conventional” approaches, the paper seeks to assess these alternative models in terms of empirical success (using laboratory and field data) and theoretical usefulness. The closing sections reflect on some new directions emerging in this literature.