 Expected utility hypothesis

The Expected Utility Hypothesis (EUH) is a fundamental concept in economics and decision theory that describes how rational individuals make choices under conditions of uncertainty. According to this hypothesis, individuals evaluate risky options by considering the expected utility rather than the expected outcome or monetary value alone. **Key Concepts of the Expected Utility Hypothesis:** 1. **Expected Utility**: This refers to the sum of the utilities of all possible outcomes, each weighted by its probability of occurrence.