The intrinsic value of risky prospects

Abstract

We study the representation of attitudes to risk in Jeffrey’s (The logic of decision, University of Chicago Press, Chicago, 1965) decision-theoretic framework suggested by Stefansson and Bradley (Philos Sci 82(4):602–625, 2015; Br J Philos Sci 70(1):77–102, 2017) and Bradley (Econ Philos 32(2):231–248, 2016; Decisions theory with a human face, Cambridge University Press, Cambridge, 2017). We show that on this representation, the value of any prospect may be expressed as a sum of two components, the prospect’s instrumental value (the value the prospect has only in virtue of the outcomes it might lead to) and the prospect’s intrinsic value (the value the prospect has only in virtue of the way it assigns different probabilities to the different outcomes). Both components have an expectational form. We also make a distinction between a prospect’s overall intrinsic value and a prospect’s conditional intrinsic value given each one of its possible outcomes and argue that this distinction has great explanatory power. We explore the relation between these two types of intrinsic values and show that they are determined at the level of preferences. Finally, we explore the relation between the intrinsic values of different prospects and point to a strong restriction on this relation that is implicit in Jeffrey’s axioms. We suggest a natural interpretation to this restriction.