August 25, 2005
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.
Abbas, A. E. and J. E. Matheson. 2005. Normative Target-Based Decision Making. Managerial and Decision Economics, 26 (6), 373-385.