Expected Utility

$
scale
$
scale
Finance

Expected Utility is a fast, free finance calculator. Enter Outcome 1 Value, Outcome 1 Utility (0-1) and Outcome 2 Value to get an instant, accurate result — complete with the formula, a step-by-step worked example, and answers to common questions, all on one page and private to your browser.

Formula

EU = (Value1 × Utility1) + (Value2 × Utility2)
  • Utility represents satisfaction level (0=worst, 1=best)
  • Different from monetary value
  • Accounts for risk preference

Risky Decision

Inputs
  • Outcome 1 Value: 1000 $
  • Outcome 1 Utility (0-1): 0.8 scale
  • Outcome 2 Value: 500 $
  • Outcome 2 Utility (0-1): 0.5 scale

Choice with 50% chance of $1k (utility 0.8) or $500 (utility 0.5) has EU = 750.

Frequently asked questions

What is utility?
Utility measures personal satisfaction from an outcome. Risk-averse people value certainty more (lower utility for risk).