Maximize Expected Utility
Still another criterion that can be employed under risk is that of maximizing expected utility. This requires that each payoff be replaced with its equivalent utility value. Obtaining these value requires that the decision maker develops a utility curve.
The straight diagonal line is the curve for the purely rational decision maker who uses expected monetary value as the payoff. She or he is said to be risk neutral. The broken curve below the risk neutral line is that of a risk seeker.
She or he will enter into ventures or select alternatives that have expected payoff below the expected monetary value in the hope that the higher outcome will be the one that occurs. The optimist (maxim criterion) and the habitual gambler are examples of individuals who have these types of utility curves.