We investigate the conflict between the ex ante and ex post criteria of social welfare in a new framework of individual and social decisions, which distinguishes between two sources of uncertainty, here interpreted as an objective and a subjective source respectively. This framework makes it possible to endow the individuals and society not only with ex ante and ex post preferences, as is usually done, but also with interim preferences of two kinds, and correspondingly, to introduce interim forms of (...) the Pareto principle. After characterizing the ex ante and ex post criteria, we present a first solution to their conflict that extends the former as much possible in the direction of the latter. Then, we present a second solution, which goes in the opposite direction, and is also maximally assertive. Both solutions translate the assumed Pareto conditions into weighted additive utility representations, and both attribute to the individuals common probability values on the objective source of uncertainty, and different probability values on the subjective source. We discuss these solutions in terms of two conceptual arguments, i.e., the by now classic spurious unanimity argument and a novel informational argument labelled complementary ignorance. The paper complies with the standard economic methodology of basing probability and utility representations on preference axioms, but for the sake of completeness, also considers a construal of objective uncertainty based on the assumption of an exogeneously given probability measure. JEL classification: D70; D81. (shrink)

Analyses of preference for the timing of uncertainty resolution usually assumes all uncertainty to resolve in one point in time. More realistically, uncertainty should be modelled to resolve gradually over time. Kreps and Porteus (1978) have introduced an axiomatically based model of time preference which can explain preferences for gradual uncertainty resolution. This paper presents an experimental test of the Kreps-Porteus model. We derive implications of the model relating preferences for gradual and one-time resolving (...) lotteries. Our data do not support the Kreps-Porteus model but show that some of the behaviour observed may be explained by similarity heuristics. (shrink)

In ‘Patients, doctors and risk attitudes,’ Makins argues that, when physicians must decide for, or act on behalf of, their patients they should defer to patient risk attitudes for many of the same reasons they defer to patient values, although with a caveat: physicians should defer to the higher-order desires of patients when considering their risk attitudes. This modification of what Makins terms the ‘deference principle’ is primarily driven by potential counterexamples in which a patient has a first-order desire with (...) one risk attitude (either risk-seeking or averse) and a second-order desire that this risk attitude not be effective in guiding their choices.1 There are two reasons we might think people with obsessive–compulsive disorder (OCD) are particularly relevant patients for evaluating Makins’ proposal. Not only might their first-order risk attitudes be irrational, but many people with OCD also judge their own OCD behaviours to be excessive or unwarranted making them structurally similar to the counterexamples outlined above. Yet, I argue that recent research about risk and decision-making under uncertainty for those with OCD complicates Makins’ proposal by raising questions of whether and to what degree their risk attitudes are irrational such that they should not play a part in the surrogate decisions made by physicians. This places more …. (shrink)

A hybrid preference framework is proposed for strategic conflict analysis to integrate preference strength and preference uncertainty into the paradigm of the graph model for conflict resolution (GMCR) under multiple decision makers. This structure offers decision makers a more flexible mechanism for preference expression, which can include strong or mild preference of one state or scenario over another, as well as equal preference. In addition, preference between two states can be uncertain. The (...) result is a preference framework that is more general than existing models which consider preference strength and preference uncertainty separately. Within the hybrid preference structure, four kinds of stability are defined as solution concepts and a post-stability analysis, called status quo analysis, which can be used to track the evolution of a given conflict. Algorithms are provided for implementing the key inputs of stability analysis and status quo analysis within the extended preference structure. The new stability concepts under the hybrid preference structure can be used to model complex strategic conflicts arising in practical applications, and can provide new insights for the conflicts. The method is illustrated using the conflict over proposed bulk water exports from Lake Gisborne in Newfoundland, Canada. (shrink)

Despite Fisher's (1930) psychological intuitions of and the formal treatment given by Yaari (1965, Review of Economic Studies 32, 137), the intertemporal model of choice is mainly a model with certain lifetime. The purpose of this paper is to reconsider this assumption, starting from a very simple two-period model of choice with lifetime uncertainty. We examine the comparative statics of the model at the first two orders and replace the concept of `pure time preference' by taking into account (...) the subjective treatment of the probability of survival. (shrink)

Genetic testing seems to hold out hope for the cure of a number of debilitating conditions. At the same time, many people fear the information that genetic testing can make available. In this commentary, I argue that as of now, the nature of the information revealed in such tests should lead to cautious views about the value of genetic testing. Moreover, I suggest that our overall views about such testing should account for the fact that individuals place different sorts of (...) value on the possession of their own genetic information. As a result, we should largely defer to personal preference in thinking about the propriety of genetic testing. (shrink)

Non-compensatory aggregation rules are applied in a variety of problems such as voting theory, multi-criteria analysis, composite indicators, web ranking algorithms and so on. A major open problem is the fact that non-compensability implies the analytical cost of loosing all available information about intensity of preference, i.e. if some variables are measured on interval or ratio scales, they have to be treated as measured on an ordinal scale. Here this problem has been tackled in its most general formulation, that (...) is when mixed measurement scales (interval, ratio and ordinal) are used and both stochastic and fuzzy uncertainties are present. Objectives of this article are first to present a comprehensive review of useful solutions already proposed in the literature and second to advance the state of the art mainly in the theoretical guarantee that weights have the meaning of importance coefficients and they can be summarized in a voting matrix. This is a key result for using non-compensatory Condorcet consistent rules. A proof on the probability of existence of ties in the voting matrix is also developed. (shrink)

Both economists and psychologists are interested in understanding decision making under uncertainty. Yet, they rely on different concepts to analyse human behaviour: economists use economic preference parameters rooted in utility theory, while psychologists use personality traits to describe responses to uncertain situations. Using a large sample of university students, this study examines and contrasts five economic preference parameters and six psychological personality traits that are commonly used to study individuals’ attitudes towards uncertainty. A novelty of this (...) paper is including both the economic concept of ambiguity aversion as well as the personality trait of ambiguity intolerance. We find that standard economic preference measures based on incentivized choice tasks seem to capture rather different characteristics than psychological personality traits. In contrast, economic preference measures obtained from self-assessment questions appear more related to personality traits, especially ambiguity intolerance. (shrink)

This paper derives a no-trade theorem under Knightian uncertainty, which generalizes the theorem of Milgrom and Stokey by allowing general preference relations. It is shown that the no-trade theorem holds true as long as agents' preferences are dynamically consistent in the sense of Machina and Schmeidler, and satisfies the so-called piece-wise monotonicity axiom. A preference satisfying the piece-wise monotonicity axiom does not necessarily imply the additive utility representation, nor is necessarily based on beliefs.

Uncertainty in Post-Reformation Catholicism provides a historical account of early modern probabilism and its theological, intellectual, and cultural implications. First developed in the second half of the sixteenth century, probabilism represented a significant and controversial novelty in Catholic moral theology. By the second half of the seventeenth century, probabilism became and has since been associated with moral, intellectual, and cultural decadence. Stefania Tutino challenges this understanding and claims that probabilism played a central role in addressing the challenges that geographical (...) and cultural expansions posed to traditional Catholic theology. Tutino argues that early modern theologians used probabilism to integrate major changes within the post-Reformation Catholic theological and intellectual system. Probabilist theologians realized that their time was characterized by many changes that traditional theology was not equipped to deal with, which consequently provoked an exponential growth of uncertainties, doubts, and dilemmas of conscience. Probabilism represented the result of their efforts to appreciate, come to terms with, and manage that uncertainty. Uncertainty in Post-Reformation Catholicism reinterprets probabilism as a way of dealing with moral and epistemological doubts in quickly changing times, a way that still may be useful today. Uncertainty in Post-Reformation Catholicism argues that probabilism played a central role in addressing the challenges that a geographically and intellectually expanding world posed to traditional Catholic theology. Early modern probabilist theologians realized that their time was characterized by many changes and novelties that traditional theology was not equipped to deal with, and that consequently provoked an exponential growth of uncertainties, doubts, and dilemmas of conscience. These theologians used probabilism as a means to integrate changes and novelties within the post-Reformation Catholic theological and intellectual system. Seen in this light, probabilism represented the result of their attempts to appreciate, come to terms with, and manage uncertainty. The problem of uncertainty was not only crucial then, but remains central even today. Despite the unprecedented amount of information available to us, we are becoming less able to formulate arguments based on facts, and more dependent on a cacophony of opinions that often simply reproduce our own implicit or explicit biases, prejudices, and preconceived preferences. (shrink)

This paper deals with decision makers who choose among information systems. It shows that the properties of Schur convexity and of quasi-convexity are equivalent, even when general preferences are considered. Since Schur convexity is closely related to having a willingness to accept information and since quasi-convexity is closely related to having a preference for early resolution of the uncertainty about which information system prevails, then it follows that the equivalence implies that decision makers prefer more information to less (...) if, and only if, they prefer early resolution of uncertainty to later resolution. (shrink)

We introduce two novel frameworks for choice under complete uncertainty. These frameworks employ intervals to represent uncertain utility attaching to outcomes. In the first framework, utility intervals arising from one act with multiple possible outcomes are aggregated via a set-based approach. In the second framework the aggregation of utility intervals employs multi-sets. On the aggregated utility intervals, we then introduce min–max decision rules and lexicographic refinements thereof. The main technical results are axiomatic characterizations of these min–max decision rules and (...) these refinements. We also briefly touch on the independence of introduced axioms. Furthermore, we show that such characterizations give rise to novel axiomatic characterizations of the well-known min–max decision rule?mnx?mnx in the classical framework of choice under complete uncertainty. (shrink)

Given the deep disagreement surrounding population axiology, one should remain uncertain about which theory is best. However, this uncertainty need not leave one neutral about which acts are better or worse. We show that as the number of lives at stake grows, the Expected Moral Value approach to axiological uncertainty systematically pushes one towards choosing the option preferred by the Total and Critical Level views, even if one’s credence in those theories is low.

Given the deep disagreement surrounding population axiology, one should remain uncertain about which theory is best. However, this uncertainty need not leave one neutral about which acts are better or worse. We show that, as the number of lives at stake grows, the Expected Moral Value approach to axiological uncertainty systematically pushes one toward choosing the option preferred by the Total View and critical-level views, even if one’s credence in those theories is low.

In this paper I argue that the rationality of law and legal decision making would be enhanced by a systematic attempt to recognize and respond to the implications of empirical uncertainty for policy making and decision making. Admission of uncertainty about the accuracy of facts and the validity of assumptions relied on to make inferences of fact is commonly avoided in law because it raises the spectre of paralysis of the capacity to decide issues authoritatively. The roots of (...) this short-sighted view are found in primitive mechanical models of relationships in the empirical and social world – those of objective causality and determinism. Insofar as it is believed that if we had sufficient data a clear and unequivocal answer would be available to each question, admission of uncertainty is seen as a sign of insufficiency, incompetence, impotence, and is avoided whenever a decision that must be seen to be based on valid reasons, cannot be avoided. Avoidance of some decisions, duplicity in others, is the result. -/- Decision-making must be restructured to recognize the provisional and context-bound validity and relevance of the models we use to conceptualize and order our understanding of phenomena, and to utilize this awareness as an instrument in the production of legal policies and decisions that will be authoritative precisely because they are honestly accurate and socially responsible. The paper makes a start on such a re-structuring of the legal process by exploring the implications of the observation that if law is to be “just”: 1) legal policy must be based on accurate information and rationally related to social goals; and 2) decisions applying policy to individual fact situations must be based on assumptions that are both relevant and accurate. -/- Reasons for determinations of fact must be given, otherwise the presumption that the trier of fact is “reasonable” is an unconditional licence to use private modes of logic and theories of social and natural science. What is not disclosed cannot be challenged on grounds of invalidity or irrelevance. Use of “objective validity” as a standard to evaluate conclusions made by the trier of fact in contentious cases would only serve to beg all important questions by concealing: 1) fundamental normative conflict, and 2) the limited nature and applicability of many validity claims. -/- Our use of the phrases “undue risk,” “public interest,” “reasonable,” and “necessary,” reflects the weight we choose to give conflicting social values and goals when we must make decisions in relative ignorance of all the consequences. “Objective criteria” are of limited utility in legal decision-making because their social meaning is derivative. Policy generation in the absence of any coherent conceptual-normative framework, use of vague terminology in legislation stating policy, and the absence of rational means to distinguish between individual cases to which decision-makers are required by law to apply policy, make it inevitable that many legal “decisions” made in the guise of determinations of objective fact, are charades, an arbitrary, capricious, intuitive, subjective (and thus private) use of public decision-making power. -/- Law must alter its aspirations and recognize that rational decision-making is a process that can occur only within parameters set by present knowledge and societal preference structures. Only by working with the constraints imposed by these parameters is it possible to achieve “just” decisions. Where no rational basis for differentiating cases exists, “individualized justice” must be avoided and public policy articulated in law applied uniformly to all cases in a class. The terms “reasonable” and “necessary,” used to describe policy and its consequences for specific cases, must be understood to represent provisional societal assessments, attempts to implement societal preference structures in the face of limited knowledge. Heightened awareness of the limited nature of our knowledge can only result in legal policies that have a more explicit normative basis. (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)

Climate science evaluates hypotheses about the climate using computer simulations and complex models. The models that drive these simulations, moreover, represent the efforts of many different agents, and they arise from a compounding set of methodological choices whose effects are epistemically inscrutable. These facts, I argue in this chapter, make it extremely difficult for climate scientists to estimate the degrees of uncertainty associated with these hypotheses that are free from the influences of past preferences—preferences both with regard to importance (...) of one prediction over another and with regard to avoidance of false positive over false negatives and vice versa. This leaves an imprint of non-epistemic values in the nooks and crannies of climate science. (shrink)

ABSTRACT Is uncertainty about preferences rationally possible? And if so, does it matter for rational decision? It is argued that uncertainty about preferences is possible and should play the same role in rational decision-making as uncertainty about worldly facts. The paper develops this hypothesis and defends it against various objections.

In service marketing, AI assistants and self-service technology have become popular. As a result, it is critical to enrich the understanding of whether consumers react differently in the artificial intelligence service context in comparison with the human service context. This study examines the effect of assistant type on consumers’ decision-making. Through three experiments, this research finds that variety seeking will be higher when consumers are making decision in AI service environment. Furthermore, we tested uncertainty as the underlying mechanism. Moreover, (...) we demonstrated that this pattern is moderated by situational involvement. Specifically, in consumption contexts of high involvement, the consumers are less likely to seek variety, and in consumption contexts of low involvement, they prefer more variety. This research offers service providers new insights by revealing how, why, and when the interaction of AI technology influences consumers’ decision-making in service marketing. (shrink)

The article discusses the theoretical status of the category of uncertainty. Instead of the classical definitions of uncertainty as an ontological or epistemological concept, a composite theoretical construct is proposed. In classical science, the objectivist representation of the subject of research was preferred. With the nonclassical type of rationality, there rises problem of including subjective elements in a theoretical description. Attention to subject-subject-object methodologies is increasing due to the complication of communicative interactions in science and society in the (...) digital era. One of the consequences of active innovative projective activity on a planetary scale and increasing risks is the perception in the public mind of uncertainty as a challenge. The author considers it appropriate to study the uncertainty-certainty as a paired category. The category of uncertainty was considered in philosophy, science, and management. The status of uncertainty as infinity and formlessness was recognized by Greek natural philosophers. Classical science developed the methodology of knowing the “infinite limit” through the construction of theoretical schemes (forms) and types of empirical testing. The paradox served as a means of destroying dogmatic schemes. In the context of increasingly complex communications in science, the importance of cognitive problems in the study of collective thinking and the personal beginning of creativity is increasing. Modern economic positivism is distinguished by its rejection of objective uncertainty, and the installation of the ability to efficiently manage exclusively accurate calculations is brought to extremes. (shrink)

While the foundations of climate science and ethics are well established, fine-grained climate predictions, as well as policy-decisions, are beset with uncertainties. This chapter maps climate uncertainties and classifies them as to their ground, extent and location. A typology of uncertainty is presented, centered along the axes of scientific and moral uncertainty. This typology is illustrated with paradigmatic examples of uncertainty in climate science, climate ethics and climate economics. Subsequently, the chapter discusses the IPCC’s preferred way of (...) representing uncertainties and evaluates its strengths and weaknesses from a risk management perspective. Three general strategies for decision-makers to cope with climate uncertainty are outlined, the usefulness of which largely depends on whether or not decision-makers find themselves in a context of deep uncertainty. The chapter concludes by offering two recommendations to ease the work of policymakers, faced with the various uncertainties engrained in climate discourse. (shrink)

The concept of equipoise is considered by many to be part of the ethical justification for using human subjects in clinical research. In general, equipoise indicates some uncertainty about the relative merits of the experimental intervention compared to existing treatments. Relieving this uncertainty gives scientific value to an experiment, thereby making the risks to human subjects in the trial acceptable, other considerations notwithstanding. But characterizing equipoise remains controversial since Freedman’s groundbreaking publication on the subject. We offer a new (...) account of equipoise that draws on and extends an option Freedman discarded. After establishing the importance of some account of equipoise as part of ethically justified clinical trials, we revisit Freedman’s distinction between clinical and theoretical equipoise. We raise concerns about Freedman’s preferred clinical equipoise and then rehabilitate theoretical equipoise. In particular, we use a variety of arguments from epistemology to show how Freedman was too hasty in rejecting theoretical equipoise. In addition, we argue that theoretical equipoise is a subspecies of epistemic equipoise, which we characterize as a form of uncertainty that is the result of the possibility of error. This type of uncertainty can best be alleviated by research, which produces beliefs supported by strong statistical evidence, which is a key aim of clinical trials. Further, this type of uncertainty can explain why even clinicians with more firsthand experience with an intervention than their peers, and who may not be in theoretical equipoise, could still justifiably support a trial designed to ameliorate the possibility of error due to cognitive bias. (shrink)

In normative decision theory, the weight of an uncertain event in a decision is governed solely by the probability of the event. A large body of empirical research suggests that a single notion of probability does not accurately capture peoples' reactions to uncertainty. As early as the 1920s, Knight made the distinction between cases where probabilities are known and where probabilities are unknown. We distinguish another case –- the unknowable uncertainty –- where the missing information is unavailable to (...) all. We propose that missing information influences the attractiveness of a bet contingent upon an uncertain event, especially when the information is available to someone else. We demonstrate that the unknowable uncertainty –- falls in preference somewhere in between the known and the known uncertainty. (shrink)

Let X\documentclass[12pt]{minimal} \usepackage{amsmath} \usepackage{wasysym} \usepackage{amsfonts} \usepackage{amssymb} \usepackage{amsbsy} \usepackage{mathrsfs} \usepackage{upgreek} \setlength{\oddsidemargin}{-69pt} \begin{document}$$\mathcal{X }$$\end{document} be a set of outcomes, and let I\documentclass[12pt]{minimal} \usepackage{amsmath} \usepackage{wasysym} \usepackage{amsfonts} \usepackage{amssymb} \usepackage{amsbsy} \usepackage{mathrsfs} \usepackage{upgreek} \setlength{\oddsidemargin}{-69pt} \begin{document}$$\mathcal{I }$$\end{document} be an infinite indexing set. This paper shows that any separable, permutation-invariant preference order \documentclass[12pt]{minimal} \usepackage{amsmath} \usepackage{wasysym} \usepackage{amsfonts} \usepackage{amssymb} \usepackage{amsbsy} \usepackage{mathrsfs} \usepackage{upgreek} \setlength{\oddsidemargin}{-69pt} \begin{document}$$$$\end{document} on XI\documentclass[12pt]{minimal} \usepackage{amsmath} \usepackage{wasysym} \usepackage{amsfonts} \usepackage{amssymb} \usepackage{amsbsy} \usepackage{mathrsfs} \usepackage{upgreek} \setlength{\oddsidemargin}{-69pt} \begin{document}$$\mathcal{X }^\mathcal{I }$$\end{document} admits an additive representation. That is: there exists a linearly ordered abelian group (...) R\documentclass[12pt]{minimal} \usepackage{amsmath} \usepackage{wasysym} \usepackage{amsfonts} \usepackage{amssymb} \usepackage{amsbsy} \usepackage{mathrsfs} \usepackage{upgreek} \setlength{\oddsidemargin}{-69pt} \begin{document}$$\mathcal{R }$$\end{document} and a ‘utility function’ u:X⟶R\documentclass[12pt]{minimal} \usepackage{amsmath} \usepackage{wasysym} \usepackage{amsfonts} \usepackage{amssymb} \usepackage{amsbsy} \usepackage{mathrsfs} \usepackage{upgreek} \setlength{\oddsidemargin}{-69pt} \begin{document}$$u:\mathcal{X }{{\longrightarrow }}\mathcal{R }$$\end{document} such that, for any x,y∈XI\documentclass[12pt]{minimal} \usepackage{amsmath} \usepackage{wasysym} \usepackage{amsfonts} \usepackage{amssymb} \usepackage{amsbsy} \usepackage{mathrsfs} \usepackage{upgreek} \setlength{\oddsidemargin}{-69pt} \begin{document}$$\mathbf{x},\mathbf{y}\in \mathcal{X }^\mathcal{I }$$\end{document} which differ in only finitely many coordinates, we have x≽y\documentclass[12pt]{minimal} \usepackage{amsmath} \usepackage{wasysym} \usepackage{amsfonts} \usepackage{amssymb} \usepackage{amsbsy} \usepackage{mathrsfs} \usepackage{upgreek} \setlength{\oddsidemargin}{-69pt} \begin{document}$$\mathbf{x}\succcurlyeq \mathbf{y}$$\end{document} if and only if ∑i∈Iu-u≥0\documentclass[12pt]{minimal} \usepackage{amsmath} \usepackage{wasysym} \usepackage{amsfonts} \usepackage{amssymb} \usepackage{amsbsy} \usepackage{mathrsfs} \usepackage{upgreek} \setlength{\oddsidemargin}{-69pt} \begin{document}$$\sum _{i\in \mathcal{I }} \left[u-u\right]\ge 0$$\end{document}. Importantly, and unlike almost all previous work on additive representations, this result does not require any Archimedean or continuity condition. If \documentclass[12pt]{minimal} \usepackage{amsmath} \usepackage{wasysym} \usepackage{amsfonts} \usepackage{amssymb} \usepackage{amsbsy} \usepackage{mathrsfs} \usepackage{upgreek} \setlength{\oddsidemargin}{-69pt} \begin{document}$$$$\end{document} also satisfies a weak continuity condition, then the paper shows that, for anyx,y∈XI\documentclass[12pt]{minimal} \usepackage{amsmath} \usepackage{wasysym} \usepackage{amsfonts} \usepackage{amssymb} \usepackage{amsbsy} \usepackage{mathrsfs} \usepackage{upgreek} \setlength{\oddsidemargin}{-69pt} \begin{document}$$\mathbf{x},\mathbf{y}\in \mathcal{X }^\mathcal{I }$$\end{document}, we have x≽y\documentclass[12pt]{minimal} \usepackage{amsmath} \usepackage{wasysym} \usepackage{amsfonts} \usepackage{amssymb} \usepackage{amsbsy} \usepackage{mathrsfs} \usepackage{upgreek} \setlength{\oddsidemargin}{-69pt} \begin{document}$$\mathbf{x}\succcurlyeq \mathbf{y}$$\end{document} if and only if ∗∑i∈Iu≥∗∑i∈Iu\documentclass[12pt]{minimal} \usepackage{amsmath} \usepackage{wasysym} \usepackage{amsfonts} \usepackage{amssymb} \usepackage{amsbsy} \usepackage{mathrsfs} \usepackage{upgreek} \setlength{\oddsidemargin}{-69pt} \begin{document}$${}^*\!\sum _{i\in \mathcal{I }} u\ge {}^*\!\sum _{i\in \mathcal{I }}u$$\end{document}. Here, ∗∑i∈Iu\documentclass[12pt]{minimal} \usepackage{amsmath} \usepackage{wasysym} \usepackage{amsfonts} \usepackage{amssymb} \usepackage{amsbsy} \usepackage{mathrsfs} \usepackage{upgreek} \setlength{\oddsidemargin}{-69pt} \begin{document}$${}^*\!\sum _{i\in \mathcal{I }} u$$\end{document} represents a nonstandard sum, taking values in a linearly ordered abelian group ∗R\documentclass[12pt]{minimal} \usepackage{amsmath} \usepackage{wasysym} \usepackage{amsfonts} \usepackage{amssymb} \usepackage{amsbsy} \usepackage{mathrsfs} \usepackage{upgreek} \setlength{\oddsidemargin}{-69pt} \begin{document}$${}^*\!\mathcal{R }$$\end{document}, which is an ultrapower extension of R\documentclass[12pt]{minimal} \usepackage{amsmath} \usepackage{wasysym} \usepackage{amsfonts} \usepackage{amssymb} \usepackage{amsbsy} \usepackage{mathrsfs} \usepackage{upgreek} \setlength{\oddsidemargin}{-69pt} \begin{document}$$\mathcal{R }$$\end{document}. The paper also discusses several applications of these results, including infinite-horizon intertemporal choice, choice under uncertainty, variable-population social choice and games with infinite strategy spaces. (shrink)

This essay gives necessary and sufficient conditions for recovering expected utility from choice behavior in several popular models of uncertainty. In particular, these techniques handle a finite state model; a model for which the choice space consists of probability densities and the expected utility representation requires bounded, measurable utility; and a model for which the choice space consists of Borel probability measures and the expected utility representation requires bounded, continuous utility. The key result is the identification of the continuity (...) condition necessary for the revelation of linear utility. (shrink)

Communication involves a great deal of uncertainty. Prima facie, it is therefore surprising that biological communication systems—from cellular to human—exhibit a high degree of ambiguity and often leave its resolution to contextual cues. This puzzle deepens once we consider that contextual information may diverge between individuals. In the following we lay out a model of ambiguous communication in iterated interactions between subjectively rational agents lacking a common contextual prior. We argue ambiguity’s justification to lie in endowing interlocutors with means (...) to flexibly adapt language use to each other and the context of their interaction to serve their communicative preferences. Linguistic alignment is shown to play an important role in this process; it foments convergence of contextual expectations and thereby leads to agreeing use and interpretation of ambiguous messages. We conclude that ambiguity is ecologically rational when interlocutors’ contextual expectations are generally in line or they interact multiple times in an informative context, enabling for the alignment of their expectations. In light of these results meaning multiplicity can be understood as an opportunistic outcome enabled and shaped by linguistic adaptation and contextual information. 1Meaning Multiplicity in Communication 2Ambiguous Signalling through Pragmatic Inference 2.1Preliminaries 2.2Signalling behaviour 2.3Communicative success 2.4Iterated interactions 3Predictions for Single and Iterated Interactions 3.1Simulations 3.2Exploration and past experience 3.3Preemptive adaptation 4Discussion 5Conclusion Appendix. (shrink)

Macroeconomic events often require individuals and policy-makers to make decisions that they are not accustomed to making. For example, a sovereign debt crisis makes it necessary to either default on government debt, increase taxes, cut public spending or to impose a mixture of these measures. I argue that decisions on such matters are not derived from deep preferences; they require reflections and judgement under uncertainty. Past experiences and the interaction with other individuals are likely to influence the salience of (...) preferences in the situations of decision making. Using a simple model, I illustrate how the salience of preferences changes with different degrees of individuality and conformity. Individuality is associated with the importance of private habits, while conformity is related to the perceived dissonance between initial intuitions and social opinions. The results obtained from simple simulation exercises stress that a high degree of conformity or a low degree of individuality may lead to overreactions when social opinion makers err for a short period of time. At the same time, a low degree of conformity or a high degree of individuality or leads to delayed adjustments to new circumstances. (shrink)

People can be risk seeking and risk averse, but people can also be uncertainty averse: in other words, if risk is at least the possibility of an unwanted affect, then it is not only the unwanted effect that they want to avoid, it can also be the uncertainty inherent in the possibility that they wish to avoid. This uncertainty aversion can even lead to a state where someone prefers a certain outcome at all costs, even when it (...) is the worst case. This gives rise to the following paradox: the worst case seems to be more acceptable than the state where there is still a chance that it will not materialize. We can call this the Unbearable Uncertainty Paradox. This essay provides a first conceptual sketch of this phenomenon that seems to be widespread but nevertheless does not appear to have been identified before, either by philosophers or by psychologists. (shrink)

This paper investigates hypotheses drawn from two sources: (1) Belsky, Steinberg, and Draper’s (1991) attachment theory model of the development of reproductive strategies, and (2) recent life history models and comparative data suggesting that environmental risk and uncertainty may be potent determinants of the optimal tradeoff between current and future reproduction. A retrospective, self-report study of 136 American university women aged 19–25 showed that current recollections of early stress (environmental risk and uncertainty) were related to individual differences in (...) adult time preference and adult sexual behavior, and that individual differences in time preference were related to adult attachment organization and sexual behavior. These results are consistent with the hypothesis that perceptions of early stress index environmental risk and uncertainty and mediate the attachment process and the development of reproductive strategies. On this view individual differences in time preference are considered to be part of the attachment theoretical construct of an internal working model, which itself is conceived as an evolved algorithm for the contingent development of alternative reproductive strategies. (shrink)

This paper presents a personal view of the interaction between the analysis of choice under uncertainty and the analysis of production under uncertainty. Interest in the foundations of the theory of choice under uncertainty was stimulated by applications of expected utility theory such as the Sandmo model of production under uncertainty. This interest led to the development of generalized models including rank-dependent expected utility theory. In turn, the development of generalized expected utility models raised the question (...) of whether such models could be used in the analysis of applied problems such as those involving production under uncertainty. Finally, the revival of the state-contingent approach led to the recognition of a fundamental duality between choice problems and production problems. (shrink)

Communication involves a great deal of uncertainty. Prima facie, it is therefore surprising that biological communication systems—from cellular to human—exhibit a high degree of ambiguity and often leave its resolution to contextual cues. This puzzle deepens once we consider that contextual information may diverge between individuals. In the following we lay out a model of ambiguous communication in iterated interactions between subjectively rational agents lacking a common contextual prior. We argue ambiguity’s justification to lie in endowing interlocutors with means (...) to flexibly adapt language use to each other and the context of their interaction to serve their communicative preferences. Linguistic alignment is shown to play an important role in this process; it foments convergence of contextual expectations and thereby leads to agreeing use and interpretation of ambiguous messages. We conclude that ambiguity is ecologically rational when interlocutors’ contextual expectations are generally in line or they interact multiple times in an informative context, enabling for the alignment of their expectations. In light of these results meaning multiplicity can be understood as an opportunistic outcome enabled and shaped by linguistic adaptation and contextual information. (shrink)

The literature has shown that different types of moral dilemmas elicit discrepant decision patterns. The present research investigated the role of uncertainty in contributing to these decision patterns. Two studies were conducted to examine participants' choices in commonly used dilemmas. Study 1 showed that participants’ perceived outcome probabilities were significantly associated with their moral choices, and that these associations were independent from the dilemma type. Study 2 revealed that participants had significantly less preference for killing the individual when (...) the outcome probabilities were stated using the modal verb ‘will’ than when they were stated using the numerical phrasing of ‘100%’. Our findings illustrate a discord between experimenter and participant in the interpretation of task instructions. (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)

People can be risk seeking and risk averse, but people can also be uncertainty averse: in other words, if risk is at least the possibility of an unwanted affect, then it is not only the unwanted effect that they want to avoid, it can also be the uncertainty inherent in the possibility that they wish to avoid. This uncertainty aversion can even lead to a state where someone prefers a certain outcome at all costs, even when it (...) is the worst case. This gives rise to the following paradox: the worst case seems to be more acceptable than the state where there is still a chance that it will not materialize. We can call this the Unbearable Uncertainty Paradox. This essay provides a first conceptual sketch of this phenomenon that seems to be widespread but nevertheless does not appear to have been identified before, either by philosophers or by psychologists. (shrink)

There is a broadly held view that neonatologists are ethically obligated to act to override parental nontreatment decisions for imperiled premature newborns when there is a reasonable chance of a good outcome. It is argued here that three types of uncertainty undercut any such general obligation: (1) the vagueness of the boundary at which an infant’s deficits become so intolerable that death could be reasonably preferred; (2) the uncertainty about whether aggressive treatment will result in the survival of (...) a reasonably healthy child or, alternatively, the survival of a child with intolerable deficits; and (3) the inability to determine an acceptable ratio between the likelihoods of those two outcomes. It is argued that the broadly held view accords insufficient weight to the fact that newborn intensive care increases the likelihood of harm to the child by effecting survival with intolerable deficits. Though treatment may offer a reasonable chance of a good outcome, it is argued that there are situations in which neonatologists should nonetheless defer to parental nontreatment decisions. (shrink)

Much of the theoretical work on strategic voting makes strong assumptions about what voters know about the voting situation. A strategizing voter is typically assumed to know how other voters will vote and to know the rules of the voting method. A growing body of literature explores strategic voting when there is uncertainty about how others will vote. In this paper, we study strategic voting when there is uncertainty about the voting method. We introduce three notions of manipulability (...) for a set of voting methods: sure, safe, and expected manipulability. With the help of a computer program, we identify voting scenarios in which uncertainty about the voting method may reduce or even eliminate a voter's incentive to misrepresent her preferences. Thus, it may be in the interest of an election designer who wishes to reduce strategic voting to leave voters uncertain about which of several reasonable voting methods will be used to determine the winners of an election. (shrink)

Patient preference predictors take us from known demographic descriptors to unknown facts about patients’ preferences over treatment options. However, the use of PPPs to make treatment decisions on behalf of incapacitated patients faces an apparent normative problem: their use in certain contexts appears to involve treating patients paternalistically. In this paper, I consider whether PPPs can find a home in the context of military medicine. On the assumptions that military organizations sometimes permissibly treat their members paternalistically, I identify the (...) specific circumstances in which PPPs can play a role in making treatment decisions on behalf of patients. I show that these circumstances are not only the natural home of PPPs, PPPs – or something very much like them – are precisely the sort of device required for it to be permissible to paternalistically override a patient’s expressed preferences. (shrink)

In normative decision theory, the weight of an uncertain event in a decision is governed solely by the probability of the event. A large body of empirical research suggests that a single notion of probability does not accurately capture peoples' reactions to uncertainty. As early as the 1920s, Knight made the distinction between cases where probabilities are known and where probabilities are unknown. We distinguish another case –- the unknowable uncertainty –- where the missing information is unavailable to (...) all. We propose that missing information influences the attractiveness of a bet contingent upon an uncertain event, especially when the information is available to someone else. We demonstrate that the unknowable uncertainty –- falls in preference somewhere in between the known and the known uncertainty. (shrink)

Are risk preferences stable over time? To address this question we elicit risk preferences from the same pool of subjects at two different moments in time. To interpret the results, we use a Fechner stochastic choice model in which the revealed preference of individuals is governed by some underlying preference, together with a random error. We take cumulative prospect theory as the underlying preference model (Kahneman and Tversky, Econometrica 47:263–292, 1979; Tversky and Kahneman, Journal of Risk and (...) Uncertainty 5:297–323, 1992). We observe that the aggregate pattern of preferences is very similar in both sessions, and it matches the results reported in the literature. Most subjects are risk averse for gains, and risk seeking for losses. However, the subjects that jointly agree with the reflection effect of prospect theory are around 50%. The percentage of individuals that change their responses across sessions is quite high, 63%. Estimating the stochastic choice model we find that 72% of the subjects have an underlying preference which agrees with the reflection effect of prospect theory. The remaining 28% are mainly classified as risk averse for both gains and losses. The results reinforce the empirical validity of the reflection effect. Deviations from the reflection effect can be attributed to noise, as well as to the existence of a fraction of risk averse subjects. (shrink)

This paper presents a unifying diagnosis of a number of important problems facing existing models of rational choice under moral uncertainty and proposes a remedy. I argue that the problems of (i) severely limited scope, (ii) intertheoretic comparisons, and (iii) 'swamping’ all stem from the way in which values are assigned to options in decision rules such as Maximisation of Expected Choiceworthiness. By assigning values to options under a given moral theory by asking something like ‘how much do I (...) desire this option, supposing this theory is true?’ rather than ‘how much value does this theory assign to this option?’ these problems can be avoided, while the appealing features of these accounts can be preserved. This amendment provides a role for the preferences, desires, or goals of rational agents that is curiously absent from the existing discussion of what individuals rationally ought to do when they are uncertain about what they morally ought to do. (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)

:Robert Sugden has suggested a normative standard of freedom as ‘opportunity’ that is supposed to help realign normative economics – with its traditional rational choice orientation – with behavioural economics. While allowing preferences to be incoherent, he wants to maintain the anti-paternalist stance of orthodox welfare economics. His standard, though, presupposes that people respond to uncertainty about their own future preferences by dismissing any kind of self-constraint. We argue that the approach lacks psychological substance: Sugden's normative benchmark – the (...) ‘responsible person’ – can hardly serve as a convincing role model in a contractarian setting. An alternative concept is introduced, and some implications are briefly discussed. (shrink)

We propose two different characterizations for preference relations representable by lower (upper) expectations with the aim of removing either fair price or completeness requirements. Moreover, we give an explicit characterization for comparative degrees of belief on a finite algebra of events representable by lower probabilities.