expected utility
/ɪkˌspektɪd juːˈtɪlɪti/
the weighted average of utilities across possible outcomes
expected utility in a sentence
“Rational agents maximize expected utility.”
Origin of expected utility
From expected + utility (Latin utilitas usefulness)
Related Words
risk aversion
preference for certainty over gambles with equal expected value
risk neutral
indifference between certain outcomes and gambles of equal expected value
sunk cost
a past cost that cannot be recovered
opportunity cost
the value of the best alternative forgone
marginal utility
the additional satisfaction from consuming one more unit
diminishing returns
decreasing incremental output as input increases