Ambiguity and Competitive Decision Making: Some Implications and Tests. Revision
Abstract
Contrary to most formal models of decision making under risk and uncertainty that are built on the basis of prescriptive behavioral principles or axioms, this paper derives a descriptive model of decision making under ambiguity based on principles of behavior, i.e., principles that describe how people behave as opposed to how they should behave. The model assumes that people evaluate the impact of ambiguous probabilities by first anchoring on a given value of the unknown probability and then adjusting this by the net effect of imagining or trying out other values the probability could take. The mental simulation process incorporates giving differential weight to the ranges of probability values above and below the anchor where such weight reflects individual and situational variables. In particular, the assumption that people are cautious as opposed to reckless in making decisions, leads to attributing more weight to possible values of probabilities below the anchor when considering potential gains, and the reverse when faced with potential losses.
Document Details
- Document Type
- Technical Report
- Publication Date
- Apr 01, 1988
- Accession Number
- ADA196149
Entities
People
- Robin M. Hogarth
Organizations
- University of Chicago