An additive model of decision making under risk and ambiguity (Q2283136)

The authors propose a new decision making approach, in which the usually used risk-value decision model is replaced by an explicite tradeoff between the magnitude of risk and magnitude of ambiguity. Sources of ambiguity are studied and an ambiguouse choice problem is proposed. The proposed decision model is a two-stage lottery, in which the decision maker aggigns subjective probabilities to different possible probability distributions. The separation of risk and ambiguity in the proposed decision model and providing the corresponding mathematical background is the main new result of the paper.