Aerts, Diederik and Broekaert, Jan and Czachor, Marek and D'Hooghe, Bart (2011): A QuantumConceptual Explanation of Violations of Expected Utility in Economics. Published in: Lecture Notes in Computer Science , Vol. 7052, No. 7052 (2011): pp. 192198.

PDF
MPRA_paper_41792.pdf Download (213Kb)  Preview 
Abstract
The expected utility hypothesis is one of the building blocks of classical economic theory and founded on Savage's SureThing Principle. It has been put forward, e.g. by situations such as the Allais and Ellsberg paradoxes, that reallife situations can violate Savage's SureThing Principle and hence also expected utility. We analyze how this violation is connected to the presence of the 'disjunction effect'' of decision theory and use our earlier study of this effect in concept theory to put forward an explanation of the violation of Savage's SureThing Principle, namely the presence of 'quantum conceptual thought' next to 'classical logical thought' within a double layer structure of human thought during the decision process. Quantum conceptual thought can be modeled mathematically by the quantum mechanical formalism, which we illustrate by modeling the Hawaii problem situation, a wellknown example of the disjunction effect, and we show how the dynamics in the Hawaii problem situation is generated by the whole conceptual landscape surrounding the decision situation.
Item Type:  MPRA Paper 

Original Title:  A QuantumConceptual Explanation of Violations of Expected Utility in Economics 
Language:  English 
Keywords:  Expected Utility, SureThing Principle, Quantum modeling, disjunction effect, Ellsberg paradox 
Subjects:  B  History of Economic Thought, Methodology, and Heterodox Approaches > B4  Economic Methodology > B40  General C  Mathematical and Quantitative Methods > C0  General > C00  General A  General Economics and Teaching > A1  General Economics > A10  General D  Microeconomics > D8  Information, Knowledge, and Uncertainty > D80  General 
Item ID:  41792 
Depositing User:  Diederik Aerts 
Date Deposited:  07. Oct 2012 23:31 
Last Modified:  12. Feb 2013 14:50 
References:  [1] Aerts, D. (2007a). Quantum interference and superposition in cognition: Development of a theory for the disjunction of concepts. Archive reference and link: http://arxiv.org/abs/0705.0975. [2] Aerts, D. (2007b). General quantum modeling of combining concepts: A quantum eld model in Fock space. Archive reference and link: http://arxiv.org/abs/0705.1740. [3] Aerts, D. (2009). Quantum structure in cognition. Journal of Mathematical Psychology, 53, pp. 314348 [4] Aerts, D. and Aerts, S. (1994). Applications of quantum statistics in psychological studies of decision processes. Foundations of Science, 1, pp. 8597; reprinted in B. C. van Fraassen (Ed.), Topics in the Foundation of Statistics, Springer, Dordrecht. [5] Aerts, D., Apostel, L., De Moor, B., Hellemans, S., Maex, E., Van Belle, H., Van der Veken, J. (1994). Worldviews, from Fragmentation towards Integration. Brussels: VUBPress. See also http: //www.vub.ac.be/CLEA/pub/books/worldviews.pdf for the 1997 internet edition. [6] Aerts, D., Apostel, L., De Moor, B., Hellemans, S., Maex, E., Van Belle, H., Van der Veken, J. (1995). Perspectives on the World, an Interdisciplinary Re ection. Brussels: VUBPress. [7] Aerts, D., Broekaert, J. and Gabora, L. (2010). A case for applying an abstracted quantum formalism to cognition. New Ideas in Psychology, 29, pp. 136146. Archive reference and link (2004): http://arxiv.org/abs/quantph/0404068. [8] Aerts, D. and D'Hooghe, B. (2009). Classical logical versus quantum conceptual thought: Examples in economics, decision theory and concept theory. In P. D. Bruza, D. Sofge, W. Lawless, C. J. van Rijsbergen and M. Klusch (Eds.), Proceedings of QI 2009Third International Symposium on Quantum Interaction, Book series: Lecture Notes in Computer Science, 5494, pp. 128142. Berlin, Heidelberg: Springer. [9] Aerts, D., D'Hooghe, B' and Sozzo, S. (2011). A quantum cognition analysis of the Ellsberg paradox. [10] Aerts, D. and Gabora, L. (2005a). A theory of concepts and their combinations I: The structure of the sets of contexts and properties. Kybernetes, 34, pp. 167191. [11] Aerts, D. and Gabora, L. (2005b). A theory of concepts and their combinations II: A Hilbert space representation. Kybernetes, 34, pp. 192221. [12] Aerts, D., Van Belle, H. and Van der Veken, J. (Eds.) (1999). Worldviews and the Problem of Synthesis. Dordrecht: Springer. [13] Allais, M. (1953). Le comportement de l'homme rationnel devant le risque: critique des postulats et axiomes de l'ecole Americaine. Econometrica, 21, pp. 503546. [14] Bagassi, M. and Macchi, L. (2007). The `vanishing' of the disjunction eect by sensible procrastination. Mind & Society 6, pp. 4152. [15] Busemeyer, J. R., Wang, Z. and Townsend J. T. (2006). Quantum dynamics of human decisionmaking. Journal of Mathematical Psychology, 50, pp. 220241. [16] Busemeyer, J. R., Pothos, E. & Franco, R., (in press). A quantum theoretical explanation for probability judgment 'errors'. Psychological Review. [17] Ellsberg, D. (1961). Risk, ambiguity, and the Savage axioms. Quarterly Journal of Economics, 75(4), pp. 643669. [18] Gabora, L. and Aerts, D. (2002). Contextualizing concepts using a mathematical generalization of the quantum formalism. Journal of Experimental and Theoretical Articial Intelligence, 14, pp. 327358. [19] Hampton, J. A. (1988). Disjunction of natural concepts. Memory & Cognition, 16, pp. 579591. [20] Khrennikov, A. (2008). Quantumlike model of cognitive decision making and information processing. Biosystems, 95, pp. 179187. [21] Pothos, E. M. and Busemeyer, J. R. (2009). A quantum probability explanation for violations of 'rational' decision theory. Proceedings of the Royal Society B. [22] Savage, L.J. (1954). The Foundations of Statistics. NewYork: Wiley. [23] Tversky, A. and Shar, E. (1992). The disjunction eect in choice under uncertainty. Psychological Science, 3, pp. 305309. [24] von Neumann, J. and Morgenstern, O. (1944). Theory of Games and Economic Behavior. Princeton: Princeton University Press. [25] Yukalov, V.I. and Sornette, D. (2010). Decision theory with prospect interference and entanglement. Theory and Decision, 70, pp. 283328. 
URI:  http://mpra.ub.unimuenchen.de/id/eprint/41792 