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- Title
On Risk and Uncertainty, and Objective versus Subjective Probability.
- Authors
Sharpe, Keiran
- Abstract
In this paper, we use the algebra R × R to characterise decision‐makers’ representations of risk and uncertainty. We show that risk can be represented by objective probabilities on one part of the algebra, and that uncertainty can be represented by subjective probabilities on the other part. Decision‐makers are shown to maximise a generalised form of rank‐dependent expected utility. Their occasionally anomalous behaviour is discussed.
- Subjects
RISK -- Mathematical models; MATHEMATICAL models of uncertainty; MATHEMATICAL models of economics; MATHEMATICAL models of decision making; PROBABILITY theory
- Publication
Economic Record, 2018, Vol 94, p49
- ISSN
0013-0249
- Publication type
Article
- DOI
10.1111/1475-4932.12403