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)

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 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)

Choice under uncertainty is treated in economics by different approaches. We can distinguish three of them, two of which concern individual choice, while the third frames individual choices within the analysis of the social system. The first approach can determine how a rational decision-maker must choose; the second one how a real decision-maker behaves; and the third one how decision-makers are represented in the general economic theory. The main theories that result from these approaches are briefly presented. (...) This paper considers, in particular, the third approach, which is the most general since it represents preferences by means of a continuous utility function of the possible outcomes, without any specification with regard to uncertainty. The link between the reservation prices of bets on events and their subjective probabilities is examined. It is shown as the additivity condition for these price-probabilities is not required by the Dutch book argument if preferences are represented by a continuous utility function that is not differentiable. (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)

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)

Nudges have gained popularity as a behavioral change tool that aims to facilitate the selection of the sensible choice option by altering the way choice options are presented. Although nudges are designed to facilitate these choices without interfering with people’s prior preferences, both the relation between individuals’ prior preferences and nudge effectiveness, as well as the notion that nudges ‘facilitate’ decision-making have received little empirical scrutiny. Two studies examine the hypothesis that a social proof nudge is particularly effective when (...) people have no clear prior preference, either because people are indifferent (in a colour-categorization task; Study 1, N = 255) or because people experience a choice conflict (making shopping decisions about meat products; Study 2, N = 97). Both studies employed a social proof nudge to steer participants’ choices. The potential facilitating effect of the nudge was tested using a mouse-tracker paradigm that implicitly assessed experienced uncertainty during decision-making. Results showed that the nudge was effective in steering participants’ decisions; the facilitation effect (i.e., reduced uncertainty regarding the decision) was only observed for conflicting preferences, but not under indifference. A better understanding of when and how nudges can influence individuals’ behavior may help in deciding whether nudges are an appropriate policy tool for changing particular undesirable behavior. (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 chapter of the Handbook of Utility Theory aims at covering the connections between utility theory and social ethics. The chapter first discusses the philosophical interpretations of utility functions, then explains how social choice theory uses them to represent interpersonal comparisons of welfare in either utilitarian or non-utilitarian representations of social preferences. The chapter also contains an extensive account of John Harsanyi's formal reconstruction of utilitarianism and its developments in the later literature, especially when society faces (...) class='Hi'>uncertainty rather than probabilistic risk. (shrink)

Professor Dreze is a highly respected mathematical economist and econometrician. This book brings together some of his major contributions to the economic theory of decision making under uncertainty, and also several essays. These include an important essay on 'Decision theory under moral hazard and state dependent preferences' that significantly extends modern theory, and which provides rigorous foundations for subsequent chapters. Topics covered within the theory include decision theory, market allocation and prices, consumer decisions, theory of the firm, (...) labour contracts, and public decisions. (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)

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 article shows that a Paretian social welfare function can be history independent and time consistent only if a stringent set of conditions is verified. Individual utilities must be additive. The social welfare function must be a linear combination of these utilities. Social preferences are stationary only if, in addition, all individuals have the same constant discount rate. The results are implemented in two frameworks: deterministic dynamic choice and dynamic choice under uncertainty. The applications highlight (...) that the conditions are unlikely to be met by individual preferences, and that they severely restrict social preferences. (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)

Most of the existing literature on social preferences either tests whether certain characteristics of the social context influence individual decisions, or tries to estimate parameters of social preference functions describing such behavior at the level of the entire population. In the present paper, we are concerned with measuring parameters of social preference functions at the individual level. We draw upon concepts developed for eliciting other types of utility functions, in particular the literature on decision (...) making under incomplete information. Our method derives parameters of social preference functions from indifference statements about the distribution of payoffs a group. We apply our method in a controlled social preference experiment to establish the external validity of estimated parameters. Our results show the expected relationships to some external factors and also a strong correspondence between parameter estimates and factors that, according to the subjects’ own descriptions, influenced their behavior. We also find that some concepts discussed in the literature on social preferences, in particular envy toward players receiving a larger payoff, have very diverse and complex effects at the individual level. (shrink)

We explore how risk preferences affect pro-social behavior under uncertainty. We analyze a modified dictator game in which the dictator can, by reducing her own sure payoff, increase the odds that an unknown recipient wins a lottery. We first augment a standard social preferences model with reference-dependent risk attitudes and then test the model’s predictions for the dictator’s giving behavior using a laboratory experiment. Consistent with the predictions of the model, we find that the relationship between (...) giving behavior and a giver’s loss aversion is mediated by the strength of the giver’s pro-social preferences. Among more pro-social dictators, an increase in loss aversion increases the likelihood that a dictator contributes to a recipient. (shrink)

I discuss the trilemma that consists of the following three principles being inconsistent: 1. The Common Principle: if one distribution, A, necessarily brings a higher total sum of personal value that is distributed in a more egalitarian way than another distribution, B, A is more valuable than B. 2. (Weak) ex-ante Pareto: if one uncertain distribution, A, is more valuable than another uncertain distribution, B, for each patient, A is more valuable than B. 3. Pluralism about attitudes to risk (Pluralism): (...) the personal value of a prospect is a weighted sum of the values of the prospect’s outcomes, but the weight each outcome gets might be different from the probability the prospect assigns to the outcome. (shrink)

Social and linguistic perceptions are linked. On one hand, talker identity affects speech perception. On the other hand, speech itself provides information about a talker's identity. Here, we propose that the same probabilistic knowledge might underlie both socially conditioned linguistic inferences and linguistically conditioned social inferences. Our computational–level approach—the ideal adapter—starts from the idea that listeners use probabilistic knowledge of covariation between social, linguistic, and acoustic cues in order to infer the most likely explanation of the speech (...) signals they hear. As a first step toward understanding social inferences in this framework, we use a simple ideal observer model to show that it would be possible to infer aspects of a talker's identity using cue distributions based on actual speech production data. This suggests the possibility of a single formal framework for social and linguistic inferences and the interactions between them. (shrink)

Previous research on moral dilemmas has mainly focused on decisions made under conditions of probabilistic certainty. We investigated the impact of uncertainty on the preference for action (killing one individual to save five people) and inaction (saving one but allowing five people to die) in moral dilemmas. We reported two experimental studies that varied the framing (gain vs loss), levels of risk (probability of gain and loss) and levels of ambiguity (imprecise probability information) in the choice to (...) save five individuals by sacrificing one. We found that participants preferred actions with uncertainty (risk/ambiguity) over inaction. Specifically, we found that participants preferred actions with precise probability information (risk) over inaction, and they preferred actions with modest or high levels of ambiguity over actions with precise probabilities, especially when moral dilemmas had a loss frame. We also observed commission bias in Study 2. We discussed the implications for research in moral decision-making. (shrink)

This paper introduces the likelihood method for decision under uncertainty. The method allows the quantitative determination of subjective beliefs or decision weights without invoking additional separability conditions, and generalizes the Savage–de Finetti betting method. It is applied to a number of popular models for decision under uncertainty. In each case, preference foundations result from the requirement that no inconsistencies are to be revealed by the version of the likelihood method appropriate for the model considered. A (...) unified treatment of subjective decision weights results for most of the decision models popular today. Savage’s derivation of subjective expected utility can now be generalized and simplified. In addition to the intuitive and empirical contributions of the likelihood method, we provide a number of technical contributions: We generalize Savage’s nonatomiticy condition (“P6”) and his assumption of (sigma) algebras of events, while fully maintaining his flexibility regarding the outcome set. Derivations of Choquet expected utility and probabilistic sophistication are generalized and simplified similarly. The likelihood method also reveals a common intuition underlying many other conditions for uncertainty, such as definitions of ambiguity aversion and pessimism. (shrink)

Technological innovation is almost always investigated from an economic perspective; with few exceptions, the specific technological and social nature of innovation is often ignored. We argue that a novel way to characterise and make sense of different types of technological innovation is to start considering uncertainty. This seems plausible since technological development and innovation almost always occur under conditions of uncertainty. We rely on the distinction between, on the one hand, uncertainty that can be quantified (...) (e.g. probabilistic risk) and, on the other, deep forms of uncertainty that may resist the possibility of being quantified (e.g. severe or fundamental uncertainties). On the basis of these different ingredients of uncertainty in technological innovation, we propose a new taxonomy that reveals the technological nature of innovation. Unlike previous taxonomies employed to handle different types of technological innovations, our taxonomy does not consider the economic value of innovation alone; it is much more oriented towards societal preferences and forms of technological uncertainty. Finally, we investigate the coherence of our proposal with the dual nature of technological artefacts, showing that innovation can be grounded on structural and functional factors and not just on economic ones. (shrink)

This paper addresses various solutions to Meno's Problem: Why is it that knowledge is more valuable than merely true belief? Given both a pragmatist as well as a veritist understanding of epistemic value, it is argued that a reliabilist analysis of knowledge, in general, promises a hopeful strategy to explain the extra value of knowledge. It is, however, shown that two recent attempts to solve Meno's Problem within reliabilism are severely flawed: Olsson's conditional probability solution and Goldman's value autonomization solution. (...) The paper proceeds with a discussion of the purpose of having a higher value of knowledge as opposed to merely true belief, both in evolutionary and social terms. It claims that under a reliabilist analysis of knowledge it can be explained how knowers could evolve rather than just truthful believers. Subsequently, the paper develops an account of how we can manipulate our testimonial environment in an epistemically beneficial way by valuing reliably produced true belief more that just true belief and so gives an indirect justification of the extra value of knowledge. (shrink)

Experimental data on social preferences present a number of features that need to be incorporated in econometric modelling. We explore a variety of econometric modelling approaches to the analysis of such data. The approaches under consideration are: the Random Utility approach ; the Random Behavioural approach ; and the Random Preference approach. These approaches are applied in various ways to an experiment on fairness conducted by Cappelen et al. :818–827, 2007). Various models that we estimate succeed in (...) capturing the key features of the dataset. Conclusions concerning fairness-related behaviour depend crucially on the choice of econometric model. (shrink)

We characterize the positional social preference correspondences (spc) satisfying the qualified majority property for any given majority threshold. We also characterize the positional spcs satisfying the minimal majority property. We next evaluate the probability that the Borda, the plurality and the antiplurality spcs fulfil the two aforementioned properties under the Impartial and Anonymous Culture assumption in the presence of three and four alternatives for various sizes of the society. Our results show that the Borda spc is the (...) positional spc which better behaves in relation with the qualified majority principle and the minimal majority principle. (shrink)

The disjunction effect (Tversky & Shafir, 1992) occurs when decision makers prefer option x (versus y) when knowing that event A occurs and also when knowing that event A does not occur, but they refuse x (or prefer y) when not knowing whether or not A occurs. This form of incoherence violates Savage's (1954) sure-thing principle, one of the basic axioms of the rational theory of decision making. The phenomenon was attributed to a lack of clear reasons for accepting an (...) option (x) when subjects are under uncertainty. Through a pragmatic analysis of the task and a consequent reformulation of it, we show that the effect does not depend on the presence of uncertainty, but on the introduction of non-relevant goals into the text problem, in both the well-known Gamble problem and the Hawaii problem. (shrink)

Cognitive Science, Volume 46, Issue 5, May 2022.

This paper deals with the evidential value of neuroeconomic experiments for the triangulation of economically relevant phenomena. We examine the case of social preferences, which involves bringing together evidence from behavioural experiments, neuroeconomic experiments, and observational studies from other social sciences. We present an account of triangulation and identify the conditions under which neuroeconomic evidence is diverse in the way required for successful triangulation. We also show that the successful triangulation of phenomena does not necessarily afford additional (...) confirmation to general theories about those phenomena. (shrink)

This paper proposes several concepts of efficient solutions for multicriteria decision problems under uncertainty. We show how alternative notions of efficiency may be grounded on different decision ‘contexts’, depending on what is known about the Decision Maker's (DM) preference structure and probabilistic anticipations. We define efficient sets arising naturally from polar decision contexts. We investigate these sets from the points of view of their relative inclusions and point out some particular subsets which may be especially relevant to (...) some decision situations. (shrink)

According to Hobbes, individuals care about their relative standing in a way that shapes their social interactions. To model this aspect of Hobbesian psychology, this paper supposes that agents have social preferences, that is, preferences about their comparative resource holdings. Introducing uncertainty regarding the social preferences of others unleashes a process of trust-unravelling, ultimately leading to Hobbes’s ‘state of war’. This Trust-unravelling Model incorporates important features of Hobbes’s argument that past models ignore.

Ranchers and pastoralists worldwide manage and depend upon resources from rangelands across Earth’s terrestrial surface. In the Great Plains of North America rangeland ecology has increasingly recognized the importance of managing rangeland vegetation heterogeneity to address conservation and production goals. This paradigm, however, has limited application for ranchers as they manage extensive beef production operations under high levels of social-ecological complexity and uncertainty. We draw on the ethics of care theoretical framework to explore how ranchers choose management (...) actions. We used modified grounded theory analysis of repeated interviews with ranchers to compare rancher decision-making under relatively certain and uncertain conditions and describe a typology of practices used to prioritize and choose management actions that maintain effective stewardship of these often multi-generational ranches. We contrast traditional decision-making frameworks with those described by interviewees when high levels of environmental and market uncertainty or ecological complexity led ranchers toward use of care-based, flexible and relational frameworks for decision-making. Ranchers facing complexity and uncertainty often sought “middle-ground” strategies to balance multiple, conflicting responsibilities in rangeland social-ecological systems. For example, ranchers’ care-based decision-making leads to conservative stocking approaches to “manage for the middle,” e.g. to limit risk under uncertain weather and forage availability conditions. Efforts to promote heterogeneity-based rangeland management for biodiversity conservation through the restoration of patch burn grazing and prairie dog conservation will require increased valuation of ranchers’ care work. (shrink)

Computer-mediated interaction on the Internet provides new opportunities to examine the links between reputation, risk, and the development of trust between individuals who engage in various types of exchange. In this article, we comment on the application of experimental sociological research to different types of computer-mediated social interactions, with particular attention to the emergence of what we call ‘trust networks’ (networks of those one views as trustworthy). Drawing on the existing categorization systems that have been used in experimental (...) class='Hi'>social psychology, we relate the various forms of computer-mediated exchange to selected findings from experimental research. We develop a simple typology based on the intersection of random versus fixed-partner social dilemma games, and repeated versus one-shot interaction situations. By crossing these two types of social dilemma games and two types of interaction situations, we show that many forms of Internet exchange can be categorized effectively into four mutually exclusive categories. The resulting classification system helps to integrate the existing research on t rust in experimental social psychology with the emerging field of computer-mediated exchange. (shrink)

Experimental results in Ultimatum, Trust and Social Dilemma games have been interpreted as showing that individuals are, by and large, not driven by selfish motives. But we do not need experiments to know that. In our view, what the experiments show is that the typical economic auxiliary hypothesis of non-tuism should not be generalized to other contexts. Indeed, we know that when the experimental situation is framed as a market interaction, participants will be more inclined to keep more money, (...) share less, and disregard other participants’ welfare [Hoffman et al., 1994]. When the same game is framed as a fair division one, participants overall show a much greater concern for the other parties’ interests. The data thus indicate that the context of an interaction is of paramount importance in eliciting different motives. The challenge then is to model utility functions that are general enough to subsume a variety of motives and specific enough to allow for meaningful, interesting predictions to be made. For the sake of simplicity (and brevity), in what follows we will concentrate upon the results of experiments that show what appears to be individuals’ disposition to behave in a fair manner in a variety of circumstances [Camerer, 2003]., though what we are saying can be easily applied to other research areas. Such experimental results have been variously interpreted, each interpretation being accompanied by a specific utility function. We shall consider three such functions and the underlying interpretations that support them, and assess each one on the basis of what they claim to be able to explain and predict. (shrink)

From the O.J. Simpson verdict to peace-making in the Balkans, the critical role of human judgement--complete with its failures, flaws, and successes--has never been more hotly debated and analyzed than it is today. This landmark work examines the dynamics of judgement and its impact on events that take place in human society, which require the direction and control of social policy. Research on social policy typically focuses on content. This book concentrates instead on the decision-making process itself. Drawing (...) on 50 years of empirical research in decision theory, Hammond examines the possibilities for wisdom and cognitive competence in the formation of social policies, and applies these lessons to specific examples, such as the space shuttle Challenger disaster and the health care debate. Uncertainly, he tells us, can seldom be fully eliminated; thus error is inevitable, and injustice for some unavoidable. But the capacity for make wise judgments increases to the extent that we understand the potential pitfalls and their origin. The judgment process for example involves an ongoing rivalry between intuition and analysis, accuracy and rationality. The source of this tension requires an examination of the evolutionary roots of human judgement and how these fundamental features may be changing as our civilization increasingly becomes an information and knowledge-based society. With numerous examples from law, medicine, engineering, and economics, the author dramatizes the importance of judgment and its role in the formation of social policies which affect us all, and issues the first comprehensive examination of its underlying dynamics. (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.

From the O.J. Simpson verdict to peace-making in the Balkans, the critical role of human judgement--complete with its failures, flaws, and successes--has never been more hotly debated and analyzed than it is today. This landmark work examines the dynamics of judgement and its impact on events that take place in human society, which require the direction and control of social policy. Research on social policy typically focuses on content. This book concentrates instead on the decision-making process itself. Drawing (...) on 50 years of empirical research in decision theory, Hammond examines the possibilities for wisdom and cognitive competence in the formation of social policies, and applies these lessons to specific examples, such as the space shuttle Challenger disaster and the health care debate. Uncertainly, he tells us, can seldom be fully eliminated; thus error is inevitable, and injustice for some unavoidable. But the capacity for make wise judgments increases to the extent that we understand the potential pitfalls and their origin. The judgment process for example involves an ongoing rivalry between intuition and analysis, accuracy and rationality. The source of this tension requires an examination of the evolutionary roots of human judgement and how these fundamental features may be changing as our civilization increasingly becomes an information and knowledge-based society. With numerous examples from law, medicine, engineering, and economics, the author dramatizes the importance of judgment and its role in the formation of social policies which affect us all, and issues the first comprehensive examination of its underlying dynamics. (shrink)

This paper investigates behavior in finitely repeated simultaneous and sequential-move prisoner’s dilemma games when there is one-sided incomplete information and signaling about players’ concerns for fairness, specifically, their preferences regarding “inequity aversion.” In this environment, we show that only a pooling equilibrium can be sustained, in which a player type who is unconcerned about fairness initially cooperates in order to disguise himself as a player type who is concerned about fairness. This disguising strategy induces the uninformed player to cooperate in (...) all periods of the repeated game, including the final period, at which point the player type who is unconcerned about fairness takes the opportunity to defect, i.e., he “backstabs” the uninformed player. Despite such last-minute defection, our results show that the introduction of incomplete information can actually result in a Pareto improvement under certain conditions. We connect the predictions of this “backstabbing” equilibrium with the frequently observed decline in cooperative behavior in the final period of finitely repeated experimental games. (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)

Decisions where there is not enough information for a well-informed decision due to unidentified consequences, options, or undetermined demarcation of the decision problem are called decisions under great uncertainty. This paper argues that public policy decisions on _how_ and _if_ to implement decision-making processes based on machine learning and AI for public use are such decisions. Decisions on public policy on AI are uncertain due to three features specific to the current landscape of AI, namely (i) the vagueness (...) of the definition of AI, (ii) uncertain outcomes of AI implementations and (iii) pacing problems. Given that many potential applications of AI in the public sector concern functions central to the public sphere, decisions on the implementation of such applications are particularly sensitive. Therefore, it is suggested that public policy-makers and decision-makers in the public sector can adopt strategies from the argumentative approach in decision theory to mitigate the established great uncertainty. In particular, the notions of framing and temporal strategies are considered. (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)

In the last decade, a number of studies in the behavioural sciences, particularly in psychology and economics, have explored the complexity of individual risk behaviour and its underlying factors. Most previous studies have examined the influences of various socio-economic, cognitive, biological and psychological factors on human decision-making however, the relationship between the decision-makers’ risk preferences and occupational background has not received much empirical attention. Accordingly, in the current study, we investigated how occupational background, together with decision-making framing (e.g., variations in (...) decision domain, context, presentation of risk and utility ratios), influence participants’ risk preferences for decision options with equivalent expected utility. Our novel findings indicate that risk preferences may vary among individuals from different occupational backgrounds. As such, when the task was framed in gain terms, participants who mostly deal with health/safety-related risks on a day-to-day basis (high-risk occupations) were predominantly risk-averse (avoiding risky options), while participants who mostly deal with financial/social risks (white-collar occupations) were prone to risk-seeking behaviour (avoiding certain options). Specifically, in “high-risk” occupations, participants’ pattern of choices changed from risk-averse in gain scenarios to risk-seeking in loss scenarios. However, the opposite pattern of risk preferences was found in participants with “white-collar” occupations. Our findings indicate that decision-makers’ occupational backgrounds influence risk preferences under some circumstances. (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)

In ‘Normative Uncertainty as a Voting Problem’, William MacAskill argues that positive credence in ordinal-structured or intertheoretically incomparable normative theories does not prevent an agent from rationally accounting for her normative uncertainties in practical deliberation. Rather, such an agent can aggregate the theories in which she has positive credence by methods borrowed from voting theory—specifically, MacAskill suggests, by a kind of weighted Borda count. The appeal to voting methods opens up a promising new avenue for theories of rational choice (...) under normative uncertainty. The Borda rule, however, is open to at least two serious objections. First, it seems implicitly to ‘cardinalize’ ordinal theories, and so does not fully face up to the problem of merely ordinal theories. Second, the Borda rule faces a problem of option individuation. MacAskill attempts to solve this problem by invoking a measure on the set of practical options. But it is unclear that there is any natural way of defining such a measure that will not make the output of the Borda rule implausibly sensitive to irrelevant empirical features of decision-situations. After developing these objections, I suggest an alternative: the McKelvey uncovered set, a Condorcet method that selects all and only the maximal options under a strong pairwise defeat relation. This decision rule has several advantages over Borda and mostly avoids the force of MacAskill’s objection to Condorcet methods in general. (shrink)

This article is an attempt at a systematic account of decision making under greater uncertainty than what traditional, mathematically oriented decision theory can cope with. Four components of great uncertainty are distinguished: (1) the identity of the options is not well determined (uncertainty of demarcation) ; (2) the consequences of at least some option are unknown (uncertainty of consequences); (3) it is not clear whether information obtained from others, such as experts, can be relied on (...) (uncertainty of reliance); and (4) the values relevant for the decision are not determined with sufficient precision (uncertainty of values). Some possible strategy types are proposed for each of these components. Decisions related to environmental issues are used to illustrate the proposals. (shrink)