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3. Possibilities of expected utility theory in the description of the consumer choice
The search for truth is a perennial problem common to human beings as a species. Let's admit for a moment that the truth is publicly available, man is in an absolutely determined situation, his choice, like everything in the surrounding reality, is predetermined. So the problem choice exists if and only if it is required to eliminate uncertainty. The choice of a person is based on the formed he has an image of the world as a set of ideas about phenomena, the laws of their occurrence and existence, the principles of interaction a person with the surrounding reality. The basis for such representations is a set of inferences from information obtained from past experience and social interaction. Science, and in particular economic theory, is designed to describe a choice in a situation of uncertainty, to build a model of an elementary act of choice for deriving more regularities from it. general (meso-, macro- and megaeconomic) character. As a consequence, the economy has a wide range of concepts designed describe and predict acceptance mechanisms solutions. In the presented article, we will conduct assessment of the existing directions of the theory of expected utility from the point of view of their empirical proven ability to describe consumer behavior.
3.1 The classic view of uncertainty
Features of the formation of a picture of the world are as follows. The world is represented by an endless variety of objects, having unobservable properties and observable behavior. Only an infinite mind is capable of to cover it all. The ultimate mind is able only to interpret the world. The property of human nature to deal with numbers significantly helps this, highlighting the common in objects and carrying out classifications. However, the received a simplified representation is only a part of the general, not always representative of the general population. A correct picture of the world is possible, if the cognitive capabilities of a person correspond to the complexity of the task (for human capabilities, these are the so-called polynomial
difficult tasks). "In the theory of computational complexity, problems ... are considered to be" solvable " if the required amount of computation does not grow
faster than a dimension raised to some fixed degree "In economic reality, we are dealing with problems with exponential growth of complexity, that is, the growth rate of the volume of necessary calculations exceeds the indicator of their size, raised to any fixed power. If attention and intelligence are free goods, then it is possible to form a complete picture of the world. A necessary consequence of the foregoing
is the variety of models of the world, depending on what data a person managed to collect. At the same time, it is impossible to say which of the pictures is more correct due to the same data limitation. However, the same limited possibilities for using data does not allow us to draw a conclusion about which of these models of the world is correct1. The sources of uncertainty are the unknown optimal level of transaction costs for decision-making, the behavior of other people, the reaction of nature, the laws of which are not yet up to ends are explored. F. Knight classified as follows
situations of reliability of events: A. Certainty, meaning that any event has a certain objective value the likelihood of its occurrence.
B. Uncertainty (in a broad sense)
assumes that objective probability cannot be attributed to events.
B1. Risk situation. Let's fix a set of elementary events. Let the probability be known
the occurrence of each of them, then by insurance it is possible to cover the activities of a large number of people and turn accidental losses into fixed costs. Probability in a risk situation can be a priori and a posteriori. A priori probability is rather a mathematical concept that is not applicable in economic practice. Posterior (or statistical) probability based on the stability and repeatability of phenomena. Then estimates based on the past are possible experience. Distinguish also the probability as "the degree trust ", different for different people, and a measurable probability based on the estimates of unknown probabilities by finding out the objective frequencies . Entrepreneurs (especially insurers) are forced to spend more effort and calculate the probability according to the second option (based on objective frequencies). The third classification of probability is associated with the name of G. Myrdal [5]. Economic indicators can be assessed at the beginning of the period to which they relate (ex ante) and at the end of the period (ex post). Ex post is evaluated when the result is already known, while ex ante reflects the subject's expectations, which rarely coincide under conditions of uncertainty. with ex-post-appraisal. However, decisions are made based on ex-ante-estimates.
B2. Uncertainty (in a narrow sense) reflects the fact that most situations with which we face in everyday life, do not give in statistic assessment in any of its form (this happens according to several reasons: uniqueness of situations, high costs of comparison, human laziness, cognitive distortions, etc.). In this case, the so-called subjective probability of events is used, which is inherent in a whole "bouquet" of deformations probabilities. F. Knight identifies parametric and structural uncertainty:
B2.1. parametric uncertainty allows the use of subjective probabilities, which may not coincide with the objective and describe non-recurring events.
B2.2. structural uncertainty indicates the fact that not all the set of possible events, which means the sum of the probabilities is less units. This inconvenience is eliminated by introducing an unstructured inside “strategic surprise "," finishing "the sum of probabilities to one.
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