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| Author: | Einhorn, H. J. Hogarth, R. M. |
| Title: | Decision making under ambiguity. |
| Journal: | Journal of Business
1986 : OCT, VOL. 59:4, part 2, p. S225-S250 |
| Index terms: | DECISION MAKING PROBABILITY STATISTICAL METHODS RISK ANALYSIS |
| Language: | eng |
| Abstract: | A descriptive model of judgement under ambiguity is developed in which an initial estimate serves as an anchor and adjustments are made for ambiguity via a mental simulation process. The model specifies conditions for ambiguity seeking and avoidance and sub- and superadditivity of complementary probabilities. Three experiments involving Ellsberg's paradox and the setting of buying and selling prices for insurance and warranty test the model. A choice rule under ambiguity is proposed that implies the nonindependence of ambiguous probabilities and the sign of payoff utilities. Extensions of the model to choices with explicit probabilities and the handling effects are discussed. |
SCIMA