David Bourget (Western Ontario)
David Chalmers (ANU, NYU)
Rafael De Clercq
Ezio Di Nucci
Jack Alan Reynolds
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Theory and Decision 46 (2):159-199 (1999)
In many real-world gambles, a non-trivial amount of time passes before the uncertainty is resolved but after a choice is made. An individual may have a preference between gambles with identical probability distributions over final outcomes if they differ in the timing of resolution of uncertainty. In this domain, utility consists not only of the consumption of outcomes, but also the psychological utility induced by an unresolved gamble. We term this utility anxiety. Since a reflective decision maker may want to include anxiety explicitly in analysis of unresolved lotteries, a multiple-outcome model for evaluating lotteries with delayed resolution of uncertainty is developed. The result is a rank-dependent utility representation (e.g., Quiggin, 1982), in which period weighting functions are related iteratively. Substitution rules are proposed for evaluating compound temporal lotteries. The representation is appealing for a number of reasons. First, probability weights can be interpreted as the cognitive attention allocated to certain outcomes. Second, the model disaggregates strength of preference from temporal risk aversion and thus provides some insight into the old debate about the relationship between von NeumannâMorgenstern utility functions and strength of preference value functions
|Keywords||Decision analysis Risk theory Delayed resolution of uncertainty Rank-dependent utility Stochastic stationarity|
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Astrid Hopfensitz & Frans Van Winden (2008). Dynamic Choice, Independence and Emotions. Theory and Decision 64 (2-3):249-300.
J. M. He, X. T. Huang, H. Yuan & Y. G. Chen (2012). Neural Activity in Relation to Temporal Distance: Differences in Past and Future Temporal Discounting. Consciousness and Cognition 21 (4):1662-1672.
Christopher K. Hsee & Yuval Rottenstreich (2004). Music, Pandas, and Muggers: On the Affective Psychology of Value. Journal of Experimental Psychology: General 133 (1):23-30.
Peter P. Wakker (2004). On the Composition of Risk Preference and Belief. Psychological Review 111 (1):236-241.
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