Confidence and decision |
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| Institution: | 2. Department of Medicine, University of Pittsburgh Medical Center, Pittsburgh, Pennsylvania;3. Department of Epidemiology, University of Pittsburgh, Pittsburgh, Pennsylvania;4. Department of Surgery, University of Rochester, Rochester, New York;5. Department of Medicine, University of Wisconsin School of Medicine and Public Health, Madison, Wisconsin;11. The Wolff Center at UPMC, Pittsburgh, Pennsylvania;12. Center for Health Equity Research and Promotion, VA Pittsburgh Healthcare System, Pittsburgh, Pennsylvania;8. Geriatric Research Educational and Clinical Center, Veterans Affairs Pittsburgh Healthcare System, Pittsburgh, Pennsylvania;1. School of Psychology, Georgia Institute of Technology, Atlanta, GA, USA |
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| Abstract: | Many real-life decisions have to be taken on the basis of probability judgements of which the decision maker is not entirely sure. This paper develops a decision rule for taking such decisions, which incorporates the decision makerʼs confidence in his probability judgements according to the following maxim: the larger the stakes involved in a decision, the more confidence is required in a probability judgement for it to play a role in the decision. A formal representation of the decision makerʼs confidence is proposed and used to formulate a family of decision models conforming to this maxim. A natural member of this family is studied in detail. It is structurally simpler than other recent models of decision under uncertainty, which may make it easier to apply to practical decisions, whilst being axiomatically sound, permitting the separation of beliefs and tastes, and allowing comparative statics analysis of attitudes to choosing in the absence of confidence. |
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| Keywords: | Confidence Multiple priors Confidence ranking Cautiousness coefficient Ambiguity |
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