A Representation Theorem for Choices Under Risk and Uncertainty

2000 ◽  
Author(s):  
Marcello Basili
Keyword(s):  
Representation Theorem ◽  
Risk And Uncertainty ◽  
Choices Under Risk

An Experimental Test of Event Commutativity in Decision Making Under Uncertainty

1994 ◽  
Vol 5 (6) ◽  
pp. 394-400 ◽  
Author(s):  
Ngar-Kok Chung ◽  
Detlof von Winterfeldt ◽  
R. Duncan Luce
Keyword(s):  
Risk And Uncertainty ◽  
Certainty Equivalents ◽  
Controlled Choice ◽  
Choice Procedure ◽  
Computer Controlled ◽  
Event Commutativity ◽  
Descriptive Theories ◽  
Car Accident ◽  
Choices Under Risk ◽  
Rationality Assumption

A fundamental rationality assumption of many models of choices under risk and uncertainty is that the sequencing of events should not matter to a decision maker so long as the consequences arise under the same conditions, ignoring the order of events Subjective expected utility (SEU) implies this property without exception, however, SEU is known not to be descriptive The boundary between SEU and potentially more descriptive theories, such as the rank-dependent ones, has been shown to lie at a very simple version of this property called event commutativity Two previous tests of it have yielded mixed results (Brothers, 1990, Ronen, 1973), but with some evidence from Brothers that it may be sustained if choice-based certainty equivalents are used The present study tested event commutativity using a version of the sequential choice procedure Brothers employed in his third experiment Twenty-four gambles representing a scenario of suing versus settling a car-accident dispute were presented to students, and certainty equivalents (settlement amounts) were elicited using a computer-controlled choice procedure Twenty-two of 25 subjects supported the property of event commutativity, the others violated it in ways similar to those discovered in the earlier studies

scholarly journals By chance or by choice? Biased attribution of others’ outcomes when social preferences matter

2021 ◽  
Author(s):  
Nisvan Erkal ◽  
Lata Gangadharan ◽  
Boon Han Koh
Keyword(s):  
Social Preferences ◽  
Decision Makers ◽  
Belief Formation ◽  
Risk And Uncertainty ◽  
Trade Off ◽  
Good Outcome ◽  
Attribution Biases ◽  
Choices Under Risk ◽  
Made In

AbstractDecision makers in positions of power often make unobserved choices under risk and uncertainty. In many cases, they face a trade-off between maximizing their own payoff and those of other individuals. What inferences are made in such instances about their choices when only outcomes are observable? We conduct two experiments that investigate whether outcomes are attributed to luck or choices. Decision makers choose between two investment options, where the more costly option has a higher chance of delivering a good outcome (that is, a higher payoff) for the group. We show that attribution biases exist in the evaluation of good outcomes. On average, good outcomes of decision makers are attributed more to luck as compared to bad outcomes. This asymmetry implies that decision makers get too little credit for their successes. The biases are exhibited by those individuals who make or would make the less prosocial choice for the group as decision makers, suggesting that a consensus effect may be shaping both the belief formation and updating processes.

Risk and uncertainty in applied problems of oil and gas economy

2019 ◽  
pp. 30-33
Author(s):  
A.F. Andreev ◽  
◽  
E.V. Burykina ◽  
G.N. Buliskeriya ◽  
◽  
...  
Keyword(s):  
Oil And Gas ◽  
Risk And Uncertainty

Project portfolio valuation using real options

2020 ◽  
Vol 13 (2) ◽  
pp. 126-146
Author(s):  
A.B. Lanchakov ◽  
S.A. Filin ◽  
A.Zh. Yakushev
Keyword(s):  
Real Options ◽  
Real Option ◽  
Project Portfolio ◽  
Risk And Uncertainty ◽  
Expected Effect ◽  
Investment Projects ◽  
Financial Options ◽  
Portfolio Efficiency ◽  
The Face ◽  
Effective Development

Subject. The article analyzes the expected effect of a portfolio of projects in the face of risk and uncertainty, when using real options. Objectives. The purpose is to offer a more objective formula to assess the expected impact of a portfolio of projects for real investment objects under risk and uncertainty, using real options, and provide recommendations for improving the portfolio efficiency. Methods. The study draws on methods of real options and evaluation of investment projects through the real option value, the cash flow discounting method, synthesis, and mathematical modeling. Results. We systematized the main types of real options and developed a formula for calculating the expected effect of project portfolio implementation. The said formula shows that considering the additional long-term costs embedded in a portfolio of real options, which are associated with the use of these real options, and, therefore, reducing the overall risk of projects and the entire portfolio, permit to improve the objectivity of such calculations. Conclusions. When analyzing real options that have real assets as underlying instruments, it is often impossible to apply the computational formulae for financial options, as they differ significantly. The systematization of the main types of real options helps expand the range of application of management solutions. The offered formula enables to improve the efficiency of project insurance under risk and uncertainty and to use additional opportunities for effective development of the company.

Managing Drilling Risk and Uncertainty Standard in Well Placement

2009 ◽  
Author(s):  
Benny Poedjono ◽  
Erhan Isevcan ◽  
Guy Joseph Lombardo ◽  
John Richard Walker ◽  
Simon McCulloch
Keyword(s):  
Risk And Uncertainty ◽  
Well Placement
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