>Decision making is different when you can only make a small amount of spins.
You should still be maximizing expected utility. For e.g. recreational gambling, factors in your utility function such as entertainment come into play, which explains why gambling recreationally can be rational behaviour.
Re:Expected Utility
by soVeryTired on Wednesday June 15, 2016 @04:50PM
(#11912053)
I broadly agree with what you said about gambling, but if you take that type of reasoning too far it can lead to some dubious conclusions.
If I'm free to add fudge factors to a utility function in order to explain an agent's behaviour, the assertion that the agent is rational (i.e. maximises utility) becomes meaningless. I can always add more fudge factors to explain deviation from rationality.
Much better to specify a utility function in advance and test how well the agent's behaviour fits your theory. IMO that's a trick economics often misses.
> In life, we need to make decisions under uncertainty. When you know your values, and take actions with maximum expected utility, you can take the optimal way towards achieving your goals.
Like all things statistics, it's true in the long run, over many trials.
But in many real life circumstances we don't get many trials.
Sometimes a better strategy is to disregard statistics because our sample size is small. Decision making is different when you can only make a small amount of spins.
I also think about the cost to reverse a decision that doesn't end well. As Jeff Bezos famously said (paraphrasing), it's not about the mistakes you make, but how you recover.
Some other aspects to consider are opportunity cost and diminishing marginal utility.