Confidence and decision


Games and Economic Behavior

novembre 2013, vol. 82, pp.675-692

Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

Mots clés : Confidence, Multiple priors, Confidence ranking, Cautiousness coefficient, Ambiguity

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 maker's 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 maker's 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