Decision making Under Uncertainty: The Effects of Role and Ambiguity. Revision
Abstract
In many important decisions, people are uncertain or ambiguous concerning the magnitude of the probabilities of events that can affect outcomes. The classic theory of decision making argues that people's decisions should not be affected by whether knowledge of a probability is precise or ambiguous. This chapter presents a descriptive model of how people cope with ambiguous probabilities in decision making. The model predicts that ambiguity matters. 'Decision weights' associated with ambiguous probabilities are assumed to be reached via an anchoring-and-adjustment process in which people anchor on an estimate of the probability and then adjust this as a result of mentally stimulating alternative values of the probability. The mental simulation process is affected by both the amount of ambiguity and whether outcomes are large or small gains and/or losses. One important factor that determines people's attitudes toward ambiguity is the nature of the role they assume in making decisions. (CP)
Document Details
- Document Type
- Technical Report
- Publication Date
- May 01, 1990
- Accession Number
- ADA225771
Entities
People
- Howard Kunreuther
- Robin M. Hogarth
Organizations
- University of Chicago