I found this article rather difficult to read, however I have eventually managed to understand it correctly and even enjoy reading it.
In this article, authors were revising and studying Bernoulli's framework of expected utility theory. While looking for evidence authors studied framework of fast and frugal priority heuristics.
Utility theory does not have one clear definition. It refers to subjective notion of values. In expected utility theory trade-offs ( losing something and gaining something else) we weight utility of expected monetary of 2 different, e.g lottery tickets, outcomes by their probabilities and then by summing both expected outcomes. The one that has higher utility becomes our choice. The level of utility depends on the person e.g. If poor person gets 100£ he or she will be very happy, however when person as wealthy as Donald Trump will receive the same amount of money, he will not even react to that as 100£ is a very small sum comparing to his wealth. One problem with utility theory is the evidence that people not always maximise expected utility Hardman (2007, 68). This is called the Allais paradox. It is visible when we remove a common element from the choice of 2 problems, the preferences changes. This violate a 'sure'thing'principle of expected utility theory.
Priority heuristics are introduced to react to the difference between the data and expected utility theory. Decisions are taken from decision rather than experience. The word 'priority' relates to the order by which people go through reasons to make their decision. Experiments suggest that outcome counts more than probability. According to the authors stopping rule (making decision and not looking any further for evidence) makes priority heuristic different than utility theory as the latest does not have a stopping rule. We reason by looking at minimum gain than probability of minimum gain and in the end at maximum gain. The focus is on minimum outcome so that we could avoid the worst possible outcome. Stopping rule can even occur after the first one if expected outcome is good enough.
The article study the accuracy of heuristic in predicting people's choices in contrast with heuristics that has been proposed before. They found that priority heuristic outperformed all the other ones. The key difference is the stopping rule. While classic heuristic looked at the same pieces of information, priority ones, focuses on specific aspects of the problem. They also found that priority heuristic is the best in predicting choices, even better than utility theory or prospect theory.
Prospect theory relates to how we code decision outcomes (gains and loses) in relation to the reference point. Sometimes gains can be psychological loses e.g. if we knew that we will get bonus worth 1000£ and we only get bonus worth 400£ we gain money but we feel like we've lost 600£ as that was our expected value. Value function is very similar to utility.
In your posting about the priority heuristic you say "Decisions are taken from decision rather than experience". I think you meant to say "Decisions are taken from DESCRIPTION rather than experience". All the decision problems we've looked at so far involve gambles presented to participants in a passage of text, i.e. they involve descriptions. By contrast, some recent studies have looked at people's responses when they actually experience a series of outcomes.
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