Uncertainty and emotion are an inevitable part of everyday life and play a vital role in mental health. Yet, our understanding of how uncertainty and emotion interact is limited. Here, an online survey was conducted to examine whether uncertainty evokes and modulates a range of negative and positive emotions. The data show that uncertainty is predominantly associated with negative emotional states such as fear/anxiety. However, uncertainty was also found to modulate a variety of other negative (...) and positive emotional states, depending on the valence of an anticipated outcome and the sub parameter of uncertainty. Uncertainty increased the intensity of negative emotional states and decreased the intensity of positive emotional states. These findings support prior research suggesting that uncertainty is aversive and associated with negative emotional states such as fear and anxiety. However, the findings also revealed that uncertainty is involved in eliciting and modulating a wide array of emotional phenomena beyond fear and anxiety. This study highlights an opportunity for further study of how uncertainty and emotion interactions are conceptualised generally and in relation to mental health. (shrink)

Diagnostic tests allow better informed medical decisions when there is uncertainty about a patient’s health status and, therefore, about the desirability to undertake treatment. This paper studies the relation between the expected value of diagnostic information and a patient's risk aversion. We show that the ex ante value of diagnostic information increases with risk aversion for diseases with low prevalence, but decreases with risk aversion for diseases with high prevalence. On the other hand, the ex post (...) value of diagnostic information always increases with the patient's degree of risk aversion. (shrink)

Diverse lines of evidence point to a basic human aversion to physically harming others. First, we demonstrate that unwillingness to endorse harm in a moral dilemma is predicted by individual differences in aversive reactivity, as indexed by peripheral vasoconstriction. Next, we tested the specific factors that elicit the aversive response to harm. Participants performed actions such as discharging a fake gun into the face of the experimenter, fully informed that the actions were pretend and harmless. These simulated harmful actions (...) increased peripheral vasoconstriction significantly more than did witnessing pretend harmful actions or to performing metabolically-matched non-harmful actions. This suggests that the aversion to harmful actions extends beyond empathic concern for victim harm. Together, these studies demonstrate a link between the body and moral decision making processes. (shrink)

Reestablishing feelings of control after experiencing uncertainty has long been considered a fundamental motive for human behavior. We propose that rituals (i.e., socially stipulated, causally opaque practices) provide a means for coping with the aversive feelings associated with randomness due to the perception of a connection between ritual action and a desired outcome. Two experiments were conducted (one in Brazil [n = 40] and another in the United States [n = 94]) to evaluate how the perceived efficacy of rituals (...) is affected by feelings of randomness. In a between-subjects design, the Scramble Sentence Task was used as a priming procedure in three conditions (i.e., randomness, negativity, and neutral) and participants were then asked to rate the efficacy of rituals used for problem-solving purposes. The results demonstrate that priming randomness increased participants' perception of ritual efficacy relative to negativity and neutral conditions. Implications for increasing our understanding of the relationship between perceived control and ritualistic behavior are discussed. (shrink)

Stress and anxiety can both influence risk-taking in decision-making. While stress typically increases risk-taking, anxiety often leads to risk-averse choices. Few studies have examined both stress and anxiety in a single paradigm to assess risk-averse choices. We therefore set out to examine emotional decision-making under stress in socially anxious participants. In our study, individuals (N= 87) high or low in social anxiety completed an expanded variation of theBalloon Analogue Risk Task(BART). While inflating a balloon to a larger degree is rewarded, (...) a possible explosion leads to (a) a loss of money and (b) it is followed by an emotional picture (i.e., a calm vs. an angry face). To induce stress before this task, participants were told that they would have to deliver a speech. We operationalized risk-taking by the number of pumps during inflation and its functionality by the amount of monetary gain. In addition, response times were recorded as an index of decisional conflict. Without the stressor, high socially anxious compared to low socially anxious participants did not differ in any of the dependent variables. However, under stress, the low socially anxious group took more risk and earned more money, while high socially anxious individuals remained more cautious and did not change their risk-taking under social stress. Overall, high socially anxious individuals made their decisions more hesitantly compared to low socially anxious individuals. Unexpectedly, there were no main effects or interactions with the valence of the emotional faces. This data shows that stress affects socially anxious individuals differently: in low socially anxious individuals stress fosters risk-taking, whereas high socially anxious individuals did not alter their behavior and remained risk-averse. The noveleBARTis a promising research tool to examine the specific factors that influence decision-making. (shrink)

This article investigates whether investors consider the reliability of companies’ sustainability information when determining the companies’ market value. Specifically, we examine market reactions (in terms of abnormal returns) to events that increase the reliability of companies’ sustainability information but do not provide markets with additional sustainability information. Controlling for competing effects, we regard companies’ additions to an internationally important sustainability index as such events and consider possible determinants for market reactions. Our results suggest that first, investors take into account the (...) reliability of sustainability information when determining the market value of a company and second, the benefits of increased reliability of sustainability information vary cross-sectionally. More specifically, companies that carry higher risks for investors (e.g., higher systematic investment risk, higher financial leverage, and higher levels of opportunistic management behavior) react more strongly to an increase in the reliability of sustainability information. Finally, we show that the benefits of an increase in the reliability of sustainability information are higher in times of economic uncertainty (e.g., during economic downturns and generally high stock price volatilities). (shrink)

Heath and Tversky (1991, Journal of Risk and Uncertainty 4:5–28) posed that reaction to ambiguity is driven by perceived competence. Competence effects may be inconsistent with ambiguity aversion if betting on own judgement is preferred to betting on a chance event, because judgemental probabilities are more ambiguous than chance events. This laboratory experiment analyses whether ambiguity affects prices and volumes in a double auction market, and contrasts ambiguity aversion to competence effects. In order to test for the (...) presence of competence effects, in the experiment uncertainty is tied to the realisation of events about which the decision maker is more or less knowledgeable. Two experiments are presented: in the first, knowledge is exogenous, whereas in the second the knowledge judgement is endogenous. Market prices provide evidence in favour of the competence hypothesis only when competence is self-assessed. Comparable volumes are observed in both experiments. (shrink)

This article focuses on the effects of nonbinding recommendations on bargaining outcomes. Recommendations are theorized to have two effects: they can create a focal point for final bargaining positions, and they can decrease outcome uncertainty should dispute persist. While the focal point effect may lower dispute rates, the uncertainty reduction effect is predicted to do the opposite for risk-averse bargainers. Which of these effects dominates is of critical importance in the design of alternative dispute resolution (ADR) procedures, which (...) are increasingly utilized in a variety of settings. We theoretically examine the effects of recommendations on the contract zone using a framework which allows bargainers’ final positions to influence a binding outcome should negotiations fail. This provides a more stringent test of focal points than previously considered. We also present data from controlled laboratory experiments consistent with our model. Recommendations are empirically shown to influence final bargaining positions and negotiated settlement values. In fact, recommendations significantly reduce dispute rates, even where they are completely ignored in final-stage arbitration. This highlights a potentially significant role for the use of nonbinding procedures, such as mediation, as a preliminary stage in more efficient ADR procedures. (shrink)

Child maltreatment not only leads to epigenetic changes, but also increases the risk of related behavioral deficits and mental disorders. These issues presumably are most closely associated with epigenetic changes in the brain, but epigenetic changes in peripheral tissues like blood are often examined instead, due to their accessibility. As such, the reliability of using the peripheral epigenome as a proxy for that of the brain is imperative. Previously, our lab has found aberrant methylation at the Brain-derived neurotrophic factor gene (...) in the prefrontal cortex of rats following aversive caregiving. The current study examined whether aversive caregiving alters Bdnf DNA methylation in the blood compared to the prefrontal cortex. It was revealed that DNA methylation associated with adversity increased in both tissues, but this methylation was not correlated between tissues. These findings indicate that group trends in Bdnf methylation between blood and the brain are comparable, but variation exists among individual subjects. (shrink)

Heath and Tversky (1991, Journal of Risk and Uncertainty 4:5–28) posed that reaction to ambiguity is driven by perceived competence. Competence effects may be inconsistent with ambiguity aversion if betting on own judgement is preferred to betting on a chance event, because judgemental probabilities are more ambiguous than chance events. This laboratory experiment analyses whether ambiguity affects prices and volumes in a double auction market, and contrasts ambiguity aversion to competence effects. In order to test for the (...) presence of competence effects, in the experiment uncertainty is tied to the realisation of events about which the decision maker is more or less knowledgeable. Two experiments are presented: in the first, knowledge is exogenous, whereas in the second the knowledge judgement is endogenous. Market prices provide evidence in favour of the competence hypothesis only when competence is self-assessed. Comparable volumes are observed in both experiments. (shrink)

This article presents the results of a survey designed to test, with economically sophisticated participants, Ellsberg’s ambiguity aversion hypothesis, and Smithson’s conflict aversion hypothesis. Based on an original sample of 78 professional actuaries (all members of the French Institute of Actuaries), this article provides empirical evidence that ambiguity (i.e. uncertainty about the probability) affect insurers’ decision on pricing insurance. It first reveals that premiums are significantly higher for risks when there is ambiguity regarding the probability of the (...) loss. Second, it shows that insurers are sensitive to sources of ambiguity. The participants indeed, charged a higher premium when ambiguity came from conflict and disagreement regarding the probability of the loss than when ambiguity came from imprecision (imprecise forecast about the probability of the loss). This research thus documents the presence of both ambiguity aversion and conflict aversion in the field of insurance, and discuses economic and psychological rationales for the observed behaviours. (shrink)

The paradigm for modelling decision-making under uncertainty has undoubtedly been the theory of Expected Utility, which was first developed by von Neumann and Morgenstern (1944) and later extended by Savage (1954) to the case of subjective uncertainty. The inadequacy of the theory of Subjective Expected Utility (SEU) as a descriptive theory was soon pointed out in experiments, most famously by Allais (1953) and Ellsberg (1961). The observed departures from SEU noticed by Allais and Ellsberg became known as “paradoxes”. (...) The Ellsberg paradox gave rise, several years later, to a new literature on decision-making under ambiguity. The theoretical side of this literature was pioneered by Schmeidler (1989). This literature views the departures from SEU in situations similar to those discussed by Ellsberg as rational responses to ambiguity. The rationality is “recovered” by relaxing Savage's Sure-Thing principle and adding an ambiguity-aversion postulate. Thus the ambiguity-aversion literature takes a normative point of view and does consider Ellsberg-type choices as behavioural “anomalies”. (shrink)

In this paper, we discuss the transition from secure employment to risky self-employment caused by a small increase in wealth. Building on the apportioning risk literature, we prove that the transition from secure employment to risky entrepreneurship is based on a measure of the difference between the strength of downside risk aversion and the strength of risk aversion. This result highlights the idea that using the behavioral approach of risky lotteries to study entrepreneurship can produce different results from (...) the traditional economic theory of entrepreneurship, which can have policy implications that must be considered with caution. (shrink)

The psychological and neurobiological processes underlying moral judgement have been the focus of many recent empirical studies1–11. Of central interest is whether emotions play a causal role in moral judgement, and, in parallel, how emotion-related areas of the brain contribute to moral judgement. Here we show that six patients with focal bilateral damage to the ventromedial prefrontal cortex (VMPC), a brain region necessary for the normal generation of emotions and, in particular, social emotions12–14, produce an abnor- mally ‘utilitarian’ pattern of (...) judgements on moral dilemmas that pit compelling considerations of aggregate welfare against highly emotionally aversive behaviours (for example, having to sacrifice one person’s life to save a number of other lives)7,8. In contrast, the VMPC patients’ judgements were normal in other classes of moral dilemmas. These findings indicate that, for a selective set of moral dilemmas, the VMPC is critical for normal judgements of right and wrong. The findings support a necessary role for emotion in the generation of those judgements. (shrink)

This paper considers the demand for insurance in a model with uncertain indemnity. Uncertain indemnity tends to increase the demand for insurance for precautionary reasons, but it also tends to decrease the demand due to the risk created by indemnity uncertainty. When the coefficient of relative prudence is not too large, uncertain indemnity reduces the demand for insurance and partial coverage is optimal even at actuarially fair premiums. In addition, insurance may be an inferior good or a normal good, (...) depending on the behavior of absolute risk aversion and the magnitude of the coefficient of relative risk aversion. (shrink)

We present an axiomatic model of preferences over menus that is motivated by three assumptions. First, the decision maker is uncertain ex ante (i.e., at the time of choosing a menu) about her ex post (i.e., at the time of choosing an option within her chosen menu) preferences over options, and she anticipates that this subjective uncertainty will not resolve before the ex post stage. Second, she is averse to ex post indecisiveness (i.e., to having to choose between options (...) that she cannot rank with certainty). Third, when evaluating a menu she discards options that are dominated (i.e., inferior to another option whatever her ex post preferences may be) and restricts attention to the undominated ones. Under these assumptions, the decision maker has a preference for commitment in the sense of preferring menus with fewer undominated alternatives. We derive a representation in which the decision maker’s uncertainty about her ex post preferences is captured by means of a subjective state space, which in turn determines which options are undominated in a given menu, and in which the decision maker fears, whenever indecisive, to choose an option that will turn out to be the worst (undominated) one according to the realization of her ex post preferences. (shrink)

In some severely uncertain situations, exemplified by climate change and novel pandemics, policymakers lack a reasoned basis for assigning probabilities to the possible outcomes of the policies they must choose between. I outline and defend an uncertainty averse, egalitarian approach to policy evaluation in these contexts. The upshot is a theory of distributive justice which offers especially strong reasons to guard against individual and collective misfortune.

The Sustained Attention to Response Task is a Go–No-Go signal detection task developed to measure lapses of sustained conscious attention. In this study, we examined the impact global interference and spatial uncertainty has on SART performance. Ten participants performed either a SART or a traditionally formatted version of a global–local stimuli detection task with spatially certain and uncertain signals. Reaction time in the SART was insensitive to global interference and spatial uncertainty, whereas reaction time in the low-Go task (...) was sensitive. Spatial uncertainty increased errors of omission in the SART, which was not expected if the SART measures mindlessness. There was a high correlation between participants’ errors of commission rate and their reaction time in the SART. The results, overall, support the view that the SART is a better measure of response strategy than lapses in sustained attention or mindlessness. (shrink)

People are less willing to accept bets about an event when they do not know the true probability of that event. Such uncertainty aversion has been used to explain certain economic phenomena. This paper considers how far standard private information explanations (with strategic decisions to accept bets) can go in explaining phenomena attributed to uncertainty aversion. This paper shows that if two individuals have different prior beliefs about some event, and two sided private information, then each (...) individual’s willingness to bet will exhibit a bid ask spread property. Each individual is prepared to bet for the event, at sufficiently favorable odds, and against, at sufficiently favorable odds, but there is an intermediate range of odds where each individual is not prepared to bet either way. This is only true if signals are distributed continuously and sufficiently smoothly. It is not true, for example, in a finite signal model. (shrink)

We consider bargaining situations where two players evaluate outcomes with reference-dependent utility functions, analyzing the effect of differing levels of loss aversion on bargaining outcomes. We find that as with risk aversion, increasing loss aversion for a player leads to worse outcomes for that player in bargaining situations. An extension of Nash's axioms is used to define a solution for bargaining problems with exogenous reference points. Using this solution concept we endogenize the reference points into the (...) model and find a unique solution giving reference points and outcomes that satisfy two reasonable properties, which we predict would be observed in a steady state. The resulting solution also emerges in two other approaches, a strategic (non-cooperative) approach using Rubinstein's (1982) alternating offers model and a dynamic approach in which we find that even under weak assumptions, outcomes and reference points converge to the steady state solution from any non-equilibrium state. (shrink)

While the effects of pattern learning on language processing are well known, the way in which pattern learning shapes exploratory behavior has long gone unnoticed. We report on the way in which individual differences in statistical pattern learning affect performance in the domain of language along multiple dimensions. Analyzing data from healthy monolingual adults' performance on a serial reaction time task and a self‐paced reading task, we show how individual differences in statistical pattern learning are reflected in readers' knowledge of (...) linguistic co‐occurrence patterns and in their exploration and exploitation of content‐specific and task‐general information. First, we investigated the extent to which an individual's pattern learning correlates with his or her sensitivity to systematic morphological and syntactic co‐occurrences, as evidenced while reading authentic sentences. We found that the stream of morphological and syntactic information has a more pronounced effect on the reading speed of, as we will label them, content‐sensitive learners in that the more probable the co‐occurrence pattern, the faster their reading of that pattern will be. Next, we investigated how differences in pattern learning are reflected in the ways in which individuals approach the reading task itself and adapt to it. Casting this relation in terms of exploration/exploitation strategies, known from Reinforcement Learning, we conclude that content‐sensitive learners are also more likely to initially probe (explore) a wider range of directly relevant patterns, which they can later use (exploit) to optimize their reading performance further. By affecting exploratory behavior, pattern learning influences the information that is gathered and becomes available for exploitation, thereby increasing the effect pattern learning has on language cognition. (shrink)

Health security has become a popular way of justifying efforts to control catastrophic threats to public health. Unfortunately, there has been little analysis of the concept of health security, nor the relationship between health security and other potential aims of public health policy. In this paper I develop an account of health security as an aversion to risky policy options. I explore three reasons for thinking risk avoidance is a distinctly worthwhile aim of public health policy: that security is (...) intrinsically valuable, that it is necessary for social planning and that it is an appropriate response to decision-making in contexts of very limited information. Striking the right balance between securing and maximizing population health thus requires a substantive, and hitherto unrecognized, value judgment. Finally, I critically evaluate the current health security agenda in light of this new account of the concept and its relationship to the other aims of public health policy. (shrink)

The experience of uncertainties in exploring the unknown—and dealing with them—is a key characteristic of what it means to be a life science researcher, but we have only started to understand how this characteristic shapes cultures of knowledge production, particularly in times when other—more social—uncertainties enter the field. Although the lab studies tradition has explored the workings of epistemic uncertainties, the range of potent uncertainty experiences in research cultures has been broadened within the neoliberal reorganization of academic institutions. Most (...) importantly, the stronger dependency on competitive project funding has led to increased social uncertainties. Being employed part-time and for shorter periods of time, researchers often find themselves in the precarious situation of high employment uncertainty. This article argues that the currently predominant form of organizing academic research creates a structural link between epistemic and social uncertainties. It then describes empirically different modes of coping with these uncertainties that researchers deploy and that seem to have become a variable in the governance of research cultures. To do so, it takes the academic life sciences in Austria as an example and explores them using approaches from both science and technology studies and labor studies. (shrink)

Decision-makers face severe uncertainty when they are not in a position to assign precise probabilities to all of the relevant possible outcomes of their actions. Such situations are common—novel medical treatments and policies addressing climate change are two examples. Many decision-makers respond to such uncertainty in a cautious manner and are willing to incur a cost to avoid it. There are good reasons for taking such an uncertainty-averse attitude to be permissible. However, little work has been done (...) to incorporate it into an egalitarian theory of distributive justice. We aim to remedy this lack. We put forward a novel, uncertainty-averse egalitarian view. We analyse when the aims of reducing inequality and limiting the burdens of severe uncertainty are congruent and when they conflict, and highlight practical implications of the proposed view. We also demonstrate that if uncertainty aversion is permissible, then utilitarians must relinquish a favourite argument against egalitarianism. (shrink)

An increasingly prevalent approach to studying human cognition is to construe the mind as optimally allocating limited cognitive resources among cognitive processes. Under this bounded rationality approach (Icard in Philos Sci 85(1):79–101, 2018; Simon in Utility and probability, Palgrave Macmillan, 1980), it is common to assume that resource-bounded cognitive agents approximate normative solutions to statistical inference problems, and that much of the bias and variability in human performance can be explained in terms of the approximation strategies we employ. In this (...) paper, we argue that this approach restricts itself to an unnecessarily narrow scope of cognitive models, which limits its ability to explain how humans flexibly adapt their representations to novel environments. We argue that more attention should be paid to how we form our cognitive representations in the first place, and advocate for pluralistic framework which jointly optimizes over both representations and algorithms for manipulating them. We identify several fundamental trade-offs that manifest in this joint optimization, and draw on recent work to motivate a unified formal framework for this analysis. We illustrate a simplified version of this analysis with a case study in social cognition, and outline several new directions for research that this approach suggests. (shrink)

We consider a situation where an individual is facing an uncertain situation, but may costly alter his knowledge of the uncertainties. We study in this context how risk aversion may modify the individual search behavior. We consider a one-armed bandit problem (where one arm is safe and the other is risky) and study how the agent risk aversion can change the sequence of arms selected. The main result is that when the utility function is more concave, the agent (...) has more chances to select the safe arm. We also discuss how search is affected by risk aversion. (shrink)

Loss aversion can occur in riskless and risky choices. We present novel evidence on both in a non-student sample (660 randomly selected customers of a car manufacturer). We measure loss aversion in riskless choice in endowment effect experiments within and between subjects and find similar levels of average loss aversion in both. The subjects of the within study also participate in a simple lottery choice task which arguably measures loss aversion in risky choices. We find substantial (...) heterogeneity in both measures of loss aversion. Loss aversion in riskless choice and loss aversion in risky choice are strongly positively correlated, but on average riskless loss aversion is higher than risky loss aversion. We find that in both choice tasks, loss aversion increases in age, income, and wealth, and decreases in education. Our results provide novel supportive input to the debate about the reality of loss aversion. (shrink)

Daniel Ellsberg presented in Ellsberg (The Quarterly Journal of Economics 75:643–669, 1961) various examples questioning the thesis that decision making under uncertainty can be reduced to decision making under risk. These examples constitute one of the main challenges to the received view on the foundations of decision theory offered by Leonard Savage in Savage (1972). Craig Fox and Amos Tversky have, nevertheless, offered an indirect defense of Savage. They provided in Fox and Tversky (1995) an explanation of Ellsberg’s two-color (...) problem in terms of a psychological effect: ambiguity aversion . The ‘comparative ignorance’ hypothesis articulates how this effect works and explains why it is important to an understanding of the typical pattern of responses associated with Ellsberg’s two-color problem. In the first part of this article we challenge Fox and Tversky’s explanation. We present first an experiment that extends Ellsberg’s two-color problem where certain predictions of the comparative ignorance hypothesis are not confirmed. In addition the hypothesis seems unable to explain how the subjects resolve trade-offs between security and expected pay-off when vagueness is present. Ellsberg offered an explanation of the typical behavior elicited by his examples in terms of these trade-offs and in section three we offer a model of Ellsberg’s trade-offs. The model takes seriously the role of imprecise probabilities in explaining Ellsberg’s phenomenon. The so-called three-color problem was also considered in Fox and Tversky (1995). We argue that Fox and Tversky’s analysis of this case breaks a symmetry with their analysis of the two-color problem. We propose a unified treatment of both problems and we present a experiment that confirms our hypothesis. (shrink)

In multi-armed bandit problems, information acquired from experimentation is valuable because it tells the agent whether to select a particular option again in the future. This article tests whether people undervalue this information because they are ambiguity averse, or have a distaste for uncertainty about the average quality of each alternative. It is shown that ambiguity averse agents have lower than optimal Gittins indexes, appearing to undervalue information from experimentation, but are willing to pay more than ambiguity neutral agents (...) to learn the true mean of the payoff distribution, appearing to overvalue objectively given information. This prediction is tested with a laboratory experiment that elicits a Gittins index and a willingness to pay on six two-armed bandits. Consistent with the predictions of ambiguity aversion, the Gittins indexes are significantly lower than optimal and willingnesses to pay are significantly higher than optimal. (shrink)

A data provenance framework is subject to security threats and risks, which increase the uncertainty, or lack of trust, in provenance information. Information assurance is challenged by incomplete information; one cannot exhaustively characterize all threats or all vulnerabilities. One technique that specifically incorporates a probabilistic notion of uncertainty is subjective logic. Subjective logic allows belief and uncertainty, due to incomplete information, to be specified and operated upon in a coherent manner. A mapping from the standard definition of (...) information assurance to a more quantitative subjective logic framework is suggested with a focus on the specific application of data provenance. Finally, specific consideration is given to the notion of uncertainty within subjective logic and its relation to information entropy. Information entropy is an alternative measure of uncertainty and a fundamental relationship is hypothesized between uncertainty in subjective logic and entropy. (shrink)

Reasoning in medicine requires the critical use of a clinical methodology whose validity must be evaluated as well as its limits. In the last decade, an increasing amount of evidence has shown severe limitations and flaws in the conduct of prognostic studies. The main reason behind this fact is that prognostic judgments are at high risk of error. In this paper we investigate the pragmatic and illocutionary aspects of different forms of linguistic acts and judgments involved in clinical practice. (...) More specifically, we analyze the role of uncertainty with regard to ‘particular’ clinical judgments and its relation with ‘general’ evidence. Focusing on how prognostic judgments are formulated and justified, our main purpose is to highlight the explication, the structure and the limits of prognosis from a linguistic and epistemological perspective. (shrink)

Experimental results on the Ellsberg paradox typically reveal behavior that is commonly interpreted as ambiguity aversion. The experiments reported in the current paper find the objective probabilities for drawing a red ball that make subjects indifferent between various risky and uncertain Ellsberg bets. They allow us to examine the predictive power of alternative principles of choice under uncertainty, including the objective maximin and Hurwicz criteria, the sure-thing principle, and the principle of insufficient reason. Contrary to our expectations, the (...) principle of insufficient reason performed substantially better than rival theories in our experiment, with ambiguity aversion appearing only as a secondary phenomenon. (shrink)

During times of emergency like the pandemic itself, governments are often seen as exercising “exceptional power”. Given the state of growing urgency in responding to the pandemic, there is a worry that governments may resort to exercising their exceptional power arbitrarily—either willingly, unintentionally or perhaps even negligently. When power is exercised by states or even by non-state actors arbitrarily over a person or group, that is, at their own will in the absence of appropriate institutional checks and balances, republican theorists (...) argue that we are confronted with a threat to our freedom as non- domination. In this chapter, I explore whether, and in what ways, worries about domination could surface in the context of government’s enforcement of risk- containment measures in response to the pandemic. While imposition of these measures is deemed necessary and important for reducing risks in response to the pandemic, their imposition is prima facie problematic if it constitutes or entails wrongful exercise of arbitrary power, thereby risking domination of citizens. I motivate this claim by examining India’s initial response to the Covid-19 pandemic, particularly focussing on the public health emergency legislature (or lack thereof) authorising the implementation of emergency risk-containment measures. (shrink)

Model evaluation for long term climate predictions must be done on quantities other than the actual prediction, and a comprehensive uncertainty quantification is impossible. An ad hoc alternative is provided by coordinated model intercomparisons which typically use a “one model one vote” approach. The problem with such an approach is that it treats all models as independent and equally plausible. Reweighting all models of the ensemble for performance and dependence seems like an obvious way to improve on model democracy, (...) yet there are open questions on what constitutes a “good” model, how to define dependency, how to interpret robustness, and how to incorporate background knowledge. Under¬standing those issues has the potential to increase confidence in model predictions in modeling efforts outside of climate science where similar challenges exist. (shrink)

The article presents an Internet experiment where subjects sequentially bid for basic gifts and binary-lotteries on these gifts in incentive compatible Vickrey auctions. Subjects exhibit uniformly pessimistic prize-weighting in spite of precautions to reduce suspicion and prohibit collusion. The bids for lotteries are close to the minimal payable value, even when the probability of obtaining a better prize is larger than 50%. Prize-weighting becomes even more conservative as the distance in value of payable prizes increases. The twofold aversive affect appears (...) for three distinct groups of students; we demonstrate, however, that the same subjects overweight small win-probabilities in standard binary-choice. (shrink)

ABSTRACTAttentional bias to uncertain threat is associated with anxiety disorders. Here we examine the extent to which emotional face distractors and individual differences in intolerance of uncertainty, impact saccades in two versions of the “follow a cross” task. In both versions of the follow the cross task, the probability of receiving an emotional face distractor was 66.7%. To increase perceived uncertainty regarding the location of the face distractors, in one of the tasks additional non-predictive cues were presented before (...) the onset of the face distractors and target. We did not find IU to impact saccades towards non-cued face distractors. However, we found IU, over Trait Anxiety, to impact saccades towards non-predictive cueing of face distractors. Under these conditions, IU individuals’ eyes were pulled towards angry face distractors and away from happy face distractors overall, and the speed of this deviation of the eyes was determined by the combination of the c... (shrink)

There is now considerable evidence that human sentence processing is expectation based: As people read a sentence, they use their statistical experience with their language to generate predictions about upcoming syntactic structure. This study examines how sentence processing is affected by readers' uncertainty about those expectations. In a self-paced reading study, we use lexical subcategorization distributions to factorially manipulate both the strength of expectations and the uncertainty about them. We compare two types of uncertainty: uncertainty about (...) the verb's complement, reflecting the next prediction step; and uncertainty about the full sentence, reflecting an unbounded number of prediction steps. We find that uncertainty about the full structure, but not about the next step, was a significant predictor of processing difficulty: Greater reduction in uncertainty was correlated with increased reading times. We additionally replicated previously observed effects of expectation violation, orthogonal to the effect of uncertainty. This suggests that both surprisal and uncertainty affect human RTs. We discuss the consequences for theories of sentence comprehension. (shrink)

Model evaluation for long-term climate predictions must be done on quantities other than the actual prediction, and a comprehensive uncertainty quantificationUncertainty quantification is impossible. An ad hoc alternative is provided by coordinated model intercomparisonsModel intercomparisons which typically use a “one model one vote” approach. The problem with such an approach is that it treats all models as independent and equally plausible. Reweighting all models of the ensemble for performance and dependence seems like an obvious way to improve on model (...) democracy, yet there are open questions on what constitutes a “good” model, how to define dependency, how to interpret robustnessRobustness, and how to incorporate background knowledgeBackground knowledge. UnderstandingUnderstanding those issues have the potential to increase confidence in model predictions in modeling efforts outside of climate scienceClimate science where similar challenges exist. (shrink)

We consider a situation where an individual is facing an uncertain situation, but may costly alter his knowledge of the uncertainties. We study in this context how risk aversion may modify the individual search behavior. We consider a one-armed bandit problem (where one arm is safe and the other is risky) and study how the agent risk aversion can change the sequence of arms selected. The main result is that when the utility function is more concave, the agent (...) has more chances to select the safe arm. We also discuss how search is affected by risk aversion. (shrink)

Downside risk aversion (downside RA) and decreasing absolute risk aversion (DARA) are different concepts that describe preferences for which the harm from bearing risk is lessened by an increase in wealth. This note presents some intuitive explanations of the difference between the two concepts using simple lotteries and graphical analysis. All risk-averse utility functions exhibit downside risk aversion, except those that exhibit sufficiently strong increasing absolute risk aversion. In a sense, downside RA is to be (...) expected: adding downside risk to a baseline lottery is analogous to increasing risk while adding upside risk is analogous to decreasing risk. The difference between the two concepts can be attributed to the use of different measures of the harm from risk bearing: downside RA measures harm using the utility premium and DARA measures harm using the risk premium. The two premia can change at different rates and even in different directions as wealth increases. (shrink)

While algorithmic decision-making (ADM) is projected to increase exponentially in the coming decades, the academic debate on whether people are ready to accept, trust, and use ADM as opposed to human decision-making is ongoing. The current research aims at reconciling conflicting findings on ‘algorithmic aversion’ in the literature. It does so by investigating algorithmic aversion while controlling for two important characteristics that are often associated with ADM: increased benefits (monetary and accuracy) and decreased user control. Across three high-powered (...) (Ntotal = 1192), preregistered 2 (agent: algorithm/human) × 2 (benefits: high/low) × 2 (control: user control/no control) between-subjects experiments, and two domains (finance and dating), the results were quite consistent: there is little evidence for a default aversion against algorithms and in favor of human decision makers. Instead, users accept or reject decisions and decisional agents based on their predicted benefits and the ability to exercise control over the decision. (shrink)

The processes underlying motor decision-making have recently caught considerable amount of scientific attention, focusing on the integration of empirical evidence from sensorimotor control research with psychological theories and computational models on decision-making. Empirical studies on motor decision-making suggest that the kinematics of goal-directed reaching movements are sensitive to the level of target uncertainty during movement planning. However, the source of uncertainty as a relevant factor influencing the process of motor decision-making has not been sufficiently considered, yet. In this (...) study, we test the assumption that the source of target uncertainty has an effect on motor decision-making, which can be proven by analyzing movement variability during the time course of movement execution. Ten healthy young adults performed three blocks with 66 trials of goal-directed reaching movements in each block, across which the source and level of reach target uncertainty at movement onset were manipulated (“no uncertainty”, “extrinsic uncertainty”, “intrinsic uncertainty”). Fingertip position of the right index finger was recorded using an optical motion tracking system. Standard kinematic measures (i.e. path length and movement duration) as well as variability of fingertip position across the time course of movement execution and at movement end were analyzed. In line with previous studies, we found that a high level of extrinsic target uncertainty leads to increased overall movement duration, which could be attributed to increased path length in this condition, as compared to intrinsic and no target uncertainty (all p <.001). Movement duration and path length did not show any differences between the latter two conditions. However, the time course analysis of movement variability revealed significant differences between these two conditions, with increased variability of fingertip position in the presence of intrinsic target uncertainty (Condition × Sampling point: p =.01), though considerably less than under high extrinsic target uncertainty (p ≤.001). These findings suggest that both the level and source of uncertainty have a significant effect on the processing of potential action plans during motor decision-making, which can be revealed through the analysis of the time course of movement variability at the end-effector level. (shrink)

The ArgumentIn this paper I challenge the “uncertainty reduction” argument — the dominant explanation for the rise of bureaucratic firms in the late nineteenth century. In contradiction to the agrument that “uncertainty” was a barrier to rational economic order and therefore needed to be reduced, I argue that “uncertainty” was manufactured, objectified, and reified in the course of developing industrial bureacracies. Using an alternative historical narrative I demonstrate that “uncertainty” was used to increase the “rationality” — (...) i.e., control — of hierarchies and to enhance the legitimacy of “rational planning.” In other words, strategies to “reduce uncertainty” increased the “certainty” — i.e., control and centrality — of rational planners but increased the “uncertainty” of their subordinates. I point to the fact that the “uncertainty reduction” argument became a central element in the professional idelogy of management and a focal point in management education programs. Furthermore, the canonical organization theory in the social sciences adopted the rhetoric, logic, and epistemlogy produced by the agents under its study and disseminated their ideology. Through their interrelationship in organization theory, “uncertainty” and “rationality” were enacted as two binary opposites that reproduce each other and construct one “coherent” scheme. (shrink)

This article examines the epistemology of risk assessment in the context of financial modelling for the purposes of making loan underwriting decisions. A financing request for a company in the paper and pulp industry is considered in some detail. The paper and pulp industry was chosen because it is subject to some specific risks that have been identified and studied by bankers, investors and managers of paper and pulp companies and certain features of the industry enable analysts to quantify the (...) impact of specific risk events of a given dimension on a company's future financial performance. While companies in other industries may be subject to similar risk factors, the impact of risk events may be more difficult to gauge in those industries. The ability of financial analysts to model the impact of a risk event, and hence quantify a credit risk, increases the predictive accuracy of the model. I argue that bankers and regulators should recognise the uncertainty associated with unquantifiable credit risk in financial models, and they should view this uncertainty as a credit risk factor in and of itself. Evaluating the relative degree to which credit risk is quantifiable in financial models is a potentially significant yet largely unrecognised tool for credit risk management. I consider some possible applications of this assessment tool for managing risk within the banking industry. (shrink)

In this paper, we argue that the characteristics of digital platforms challenge the fundamental assumptions of value sensitive design (VSD). Traditionally, VSD methods assume that we can identify relevant values during the design phase of new technologies. The underlying assumption is that there is onlyepistemic uncertaintyabout which values will be impacted by a technology. VSD methods suggest that one can predict which values will be affected by new technologies by increasing knowledge about how values are interpreted or understood in (...) context. In contrast, digital platforms exhibit a novel form of uncertainty, namely,ontological uncertainty: even with full information and overview, it cannot be foreseen what users or developers will do with digital platforms. Hence, predictions about which values are affected might not hold. In this paper, we suggest expanding VSD methods to account for value dynamism resulting from ontological uncertainty. Our expansions involve (1) extending VSD to the entire lifecycle of a platform, (2) broadening VSD through the addition of reflexivity, i.e. second-order learning about what values to aim at, and (3) adding specific tools of moral sandboxing and moral prototyping to enhance such reflexivity. While we illustrate our approach with a short case study about ride-sharing platforms such as Uber, our approach is relevant for other technologies exhibiting ontological uncertainty as well, such as machine learning, robotics and artificial intelligence. (shrink)

We distinguish three qualitatively different types of uncertainty—ethical, option and state space uncertainty—that are distinct from state uncertainty, the empirical uncertainty that is typically measured by a probability function on states of the world. Ethical uncertainty arises if the agent cannot assign precise utilities to consequences. Option uncertainty arises when the agent does not know what precise consequence an act has at every state. Finally, state space uncertainty exists when the agent is unsure (...) how to construct an exhaustive state space. These types of uncertainty are characterised along three dimensions—nature, object and severity—and the relationship between them is examined. We conclude that these different forms of uncertainty cannot be reduced to empirical uncertainty about the state of the world without inducing an increase in its severity. (shrink)