Coping with ignorance: Unforeseen contingencies and non-additive uncertainty (Q5940593): Difference between revisions

In real-life decision problems, decision makers are never provided with the necessary background structure: the set of states of the world, the outcome space, the set of actions. They have to device all these by themselves. The author models the (static) choice problem of a decision maker who is aware that her perception of the decision problem is too coarse, as for instance when there might be unforeseen contingencies. He makes a ``bounded rationality'' assumption on the way the decision maker deals with this difficulty, and then the author shows that imposing standard subjective expected utility axioms on her preferences only implies that they can be represented by a (generalized) expectation with respect to a non-additive measure, called a belief function. However, the axioms do have strong implications for how the decision maker copes with the type of ignorance described above. Finally, the author shows that some decision rules that have been studied in the literature can be obtained as a special case of the model presented here.