ABSTRACT
This chapter analyses paradoxes of rational behavioral axioms and empirical failures of expected utility theory. In the context of decision theory, some binary relations are introduced such that the decision maker can express his/her preference towards any pair of consequences. Decision theory under certainty is useful to introduce some rational behavioral axioms; however its practical utility is limited to the situations where the decision maker knows with certainty the state of nature associated with each possible action. More generally, the decision maker has to select the optimal action in risky contexts, that is, when a probability distribution is associated with the states of nature. Consequentiality of decisions holds when, at any time point, the decision maker only focuses on the present choice, ignoring the past choices and the already achieved outcomes. The empirical violation of the rational behavioral axioms is the most relevant weakness of the expected utility theory.
