Advances in Decision Making Under Risk and Uncertainty (eBook)

Preface 5
Contents 9
Contributors 11
Part I 14
Uncertainty and Information Modeling 14
Revealed Ambiguity and Its Consequences: Updating 15
1 Introduction 15
2 Preliminaries 17
3 Some Derived Concepts 20
4 Revealed Ambiguity and Updating 22
Appendix 25
Notes 30
References 30
Dynamic Decision Making When Risk Perception Depends on Past Experience 31
1 Introduction 31
2 Behavior at a Point of Time 33
3 Dynamic Choice 36
4 An Insurance Demand Illustration 39
5 Concluding Remarks 43
References 44
Representation of Conditional Preferences Under Uncertainty 45
1 Introduction 45
2 Axioms 48
3 Representation Results 51
4 Concluding Remark 54
Notes 58
References 58
Subjective Information in Decision Making and Communication 60
1 Introduction 60
2 Perception 61
3 Communication 67
4 Conclusion 72
Notes 72
References 73
Risk Modeling 74
Sensitivity Analysis in Decision Making: A Consistent Approach 75
1 Introduction 75
2 Sensitivity Analysis for Decision Analysis Models with Given Probabilities 78
3 Sensitivity Analysis with Uncertainty: The Expected Value Problem 88
4 Sensitivity Analysis with Uncertainty: The State of Belief Problem 90
5 Conclusions 93
Notes 94
Appendix 1: Proofs 95
References 98
Alternation Bias and the Parameterization of Cumulative Prospect Theory 100
1 Introduction 100
2 Local Representativeness Effect 102
3 Application to the St. Petersburg Gamble 102
4 Conclusion 108
Appendix 1: Mathematical Appendix 110
Notes 114
References 114
Proposing a Normative Basis for the S-Shaped Value Function 117
1 Introduction 117
2 An Evolutionary Rationale for the S-Shaped Value Function 118
3 The Impact of Prospects and Behavior on Fitness 119
4 Deriving the S-Shaped Value/Utility Function 120
5 Discussion 125
Notes 126
References 126
Experimental Individual Decision Making 127
Individual Choice from a Convex Lottery Set: Experimental Evidence 128
1 Introduction 128
2 Experimental Design 129
3 Theoretical Considerations 130
4 Original and High Stake Experiment 132
5 Transparency Experiment 136
6 Summary 137
Notes 138
References 139
Temptations and Dynamic Consistency 143
1 Introduction 143
2 The Theory Tested 144
3 The Experimental Design 145
4 The Data Analysis 147
5 Conclusions 149
Appendix 1The Consent Form, the Instructions and the DebriefingQuestionnaire and Statement 150
I Instructions for the Experiment 151
II Instructions for the Experiment 152
Appendix 2 The Implications of Alternative Mappings from the Indices to the Weightings 155
References 156
Monty Hall’s Three Doors for Dummies 157
1 Introduction 157
2 The Problem 158
3 The New Experimental Design 159
4 The Experiment 160
5 Discussion 165
6 Conclusion and a Final Remark 166
Notes 167
References 167
Overconfidence in Predictions as an Effect of Desirability Bias 169
1 Introduction 169
2 Study 1 171
3 Study 177
4 Summary and Conclusions 184
References 185
Experimental Interactive Decision Making 187
Granny Versus Game Theorist: Ambiguity in Experimental Games 188
1 Introduction 188
2 Ambiguity in Strategic Games 189
3 Design 193
4 Hypotheses and Results 195
5 Concluding Discussion 204
Appendix 1: Example of Instructions: Treatment gt (Translation) 205
Notes 207
References 208
Guessing Games and People Behaviours: What Can We Learn? 210
1 Introduction 210
2 A Generalisation of the INBR Strategy to a Game with Interior Equilibria 212
3 Aim and Setting of the Experiment 214
4 Results and Interpretation 215
5 Conclusions 219
Notes 221
References 222
The Determinants of Individual Behaviour in Network Formation: Some Experimental Evidence 223
1 Introduction 223
2 The Experimental Design 225
3 Results 229
4 Conclusions 241
Appendix 1: Instructions (English Translation) 241
Notes 244
References 245