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Beyond Expected Utility Theory Expected Utility Theory (EUT) has long been the prime building block of individual choice theory. This can be attributed to its simplifying and normative appeal which enabled economists to model individual choice in the presence of risk. It was first proposed by Daniel Bernouilli (1738) in response to the so-called St. Petersburg puzzle which describes a gamble where a coin is flipped repeatedly until a head is produced. By entering the game, agents receive a payoff off, say, $2 to the power of n where n is the number of the throw producing the first head. Although it is straightforward to realize that the expected monetary payoff is infinite, experiments showed that most prople would onlz be prepared to pay a relatively little amount to enter. Bernouilli suggested a discrepancy between the value an individual assigns to a gamble and its expected monetary value, i.e. individuals place...

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