Advanced Behavioral Economics Theory——An Extension of Expected Utility Theory and Prospect Theory

The conventional expected utility theory and the prospect theory in behavioral economics are two important theories at present to study the behavioral decision-making mode of the people.The former takes the final wealth condition as the reference basis for the people to make decisions,but the utility function-form is unclear;the latter takes the variable amount of wealth as the reference basis for the people to make decisions,but the objective probability is transformed into the subjective probability with greater randomness.As synthesis and extension of the two,we present a new consumer behavior decision-making mechanism-ratio utility theory.As an extension application of this theory,we prove in a simple way that the ratio utility theory is the theoretic basis on which exists the marginal utility progressive decrease law,and at the same time,provide empirical layer support to the ratio utility theory through quantitative analysis.