Normative Target-Based Decision Making

Publication Type: 
Authors: 
A.E. Abbas
J.E. Matheson
Description/Abstract: 
This paper relates normative expected-utility decision making to target-based decision making, and introduces a new quantity, the aspiration equivalent. We show that using the aspiration equivalent as a target provides a new method for choosing between lotteries that is consistent with expected-utility maximization. Furthermore, we show that the aspiration equivalent target provides a win–win situation for executive–manager delegation. This result furnishes a new link between normative decision analysis and target-based decision making.
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