Abstract
A new model is proposed for preferences between acts in the states formulation of decision making under uncertainty. It is designed to accommodate violations of transitivity, preference reversals, and violations of independence axioms first discussed by Allais and Ellsberg. The model is based on Fishburn’s skew-symmetric bilinear representation for preferences between lotteries and on two types of state parameters. One of these mimics the traditional subjective probabilities for states; the other addresses the phenomenon of uncertainty aversion and attitudes toward ambiguity discussed by Ellsberg. Special cases of the new model are closely related to models proposed recently by Loomes and Sugden and by Schmeidler.
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Fishburn, P.C. (1988). Uncertainty Aversion and Separated Effects in Decision Making Under Uncertainty. In: Kacprzyk, J., Fedrizzi, M. (eds) Combining Fuzzy Imprecision with Probabilistic Uncertainty in Decision Making. Lecture Notes in Economics and Mathematical Systems, vol 310. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-46644-1_2
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DOI: https://doi.org/10.1007/978-3-642-46644-1_2
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