Network approach for decision making under risk—How do we choose among probabilistic options with the same expected value?

Abstract

Conventional decision theory suggests that under risk, people choose option(s) by maximizing the expected utility. However, theories deal ambiguously with different options that have the same expected utility. A network approach is proposed by introducing ‘goal’ and ‘time’ factors to reduce the ambiguity in strategies for calculating the time-dependent probability of reaching a goal. As such, a mathematical foundation that explains the irrational behavior of choosing an option with a lower expected utility is revealed, which could imply that humans possess rationality in foresight.