Policymakers who seek to make scientifically informed decisions are constantly confronted by scientific uncertainty and expert disagreement. This thesis asks: how can policymakers rationally respond to expert disagreement and scientific uncertainty? This is a work of non-ideal theory, which applies formal philosophical tools developed by ideal theorists to more realistic cases of policymaking under scientific uncertainty. I start with Bayesian approaches to expert testimony and the problem of expert disagreement, arguing that two popular approaches— supra-Bayesianism and the standard model of (...) expert deference—are insufficient. I develop a novel model of expert deference and show how it can deal with many of these problems raised for them. I then turn to opinion pooling, a popular method for dealing with disagreement. I show that various theoretical motivations for pooling functions are irrelevant to realistic policymaking cases. This leads to a cautious recommendation of linear pooling. However, I then show that any pooling method relies on value judgements, that are hidden in the selection of the scoring rule. My focus then narrows to a more specific case of scientific uncertainty: multiple models of the same system. I introduce a particular case study involving hurricane models developed to support insurance decision-making. I recapitulate my analysis of opinion pooling in the context of model ensembles, confirming that my hesitations apply. This motivates a shift of perspective, to viewing the problem as a decision theoretic one. I rework a recently developed ambiguity theory, called the confidence approach, to take input from model ensembles. I show how it facilitates the resolution of the policymaker’s problem in a way that avoids the issues encountered in previous chapters. This concludes my main study of the problem of expert disagreement. In the final chapter, I turn to methodological reflection. I argue that philosophers who employ the mathematical methods of the prior chapters are modelling. Employing results from the philosophy of scientific models, I develop the theory of normative modelling. I argue that it has important methodological conclusions for the practice of formal epistemology, ruling out popular moves such as searching for counterexamples. (shrink)

When an agent learns of an expert's credence in a proposition about which they are an expert, the agent should defer to the expert and adopt that credence as their own. This is a popular thought about how agents ought to respond to (ideal) experts. In a Bayesian framework, it is often modelled by endowing the agent with a set of priors that achieves this result. But this model faces a number of challenges, especially when applied to non-ideal agents (who (...) nevertheless interact with ideal experts). I outline these problems, and use them as desiderata for the development of a new model. Taking inspiration from Richard Jeffrey's development of Jeffrey conditioning, I develop a model in which expert reports are taken as exogenous constraints on the agent's posterior probabilities. I show how this model can handle a much wider class of expert reports (for example reports of conditional probabilities), and can be naturally extended to cover propositions for which the agent has no prior. (shrink)

According to the mixed lexicographic/additive account of ‘better than’ and similar aggregative value comparatives like ‘healthier than’, values are multidimensional and different aspects of a value are aggregated into an overall assessment in a lexicographic way, based on an ordering of value aspects. It is argued that this theory can account for an acceptable definition of Chang’s notion of parity and that it also offers a solution to Temkin’s and Rachels’s Spectrum Cases without giving up the transitivity of overall betterness. (...) Formal details and proofs are provided in an “Appendix”. (shrink)

Axiomatic rationality is defined in terms of conformity to abstract axioms. Savage limited axiomatic rationality to small worlds, that is, situations in which the exhaustive and mutually exclusive set of future states S and their consequences C are known. Others have interpreted axiomatic rationality as a categorical norm for how human beings should reason, arguing in addition that violations would lead to real costs such as money pumps. Yet a review of the literature shows little evidence that violations are actually (...) associated with any measurable costs. Limiting axiomatic rationality to small worlds, I propose a naturalized version of rationality for situations of intractability and uncertainty, all of which are not in. In these situations, humans can achieve their goals by relying on heuristics that may violate axiomatic rationality. The study of ecological rationality requires formal models of heuristics and an analysis of the structures of environments these can exploit. It lays the foundation of a moderate naturalism in epistemology, providing statements about heuristics we should use in a given situation. Unlike axiomatic rationality, ecological rationality can explain less-is-more effects, formalize when one should move from ‘is’ to ‘ought,’ and be evaluated by goals beyond coherence, such as predictive accuracy, frugality, and efficiency. Ecological rationality can be seen as a formalization of means–end instrumentalist rationality, based on Herbert Simon’s insight that rational behavior is a function of the mind and its environment. (shrink)

Bipolar argument graphs represent the structure of complex pro and contra arguments for one or more standpoints. In this article, ampliative and exclusionary principles of evaluating argument strength in bipolar acyclic argumentation graphs are laid out and compared to each other. Argument chains, linked arguments, link attackers and supporters, and convergent arguments are discussed. The strength of conductive arguments is also addressed but it is argued that more work on this type of argument is needed to properly distinguish argument strength (...) from more general value-based components of such arguments. The overall conclusion of the article is that there is no justifiably unique solution to the problem of argument strength outside of a particular epistemological framework. (shrink)

In recent years, some epistemologists have argued that practical factors can make the difference between knowledge and mere true belief. While proponents of this pragmatic thesis have proposed necessary and sufficient conditions for knowledge, it is striking that they have failed to address Gettier cases. As a result, the proposed analyses of knowledge are either lacking explanatory power or susceptible to counterexamples. Gettier cases are also worth reflecting on because they raise foundational questions for the pragmatist. Underlying these challenges is (...) the fact that pragmatic epistemologies not only rely upon normative theories of rational choice but also require externalist standards to rule out epistemic luck. Unfortunately, we lack adequate externalist theories of rational choice. In response, I address these foundational challenges by offering the outlines of an externalist decision theory. While this task is an ambitious one that I cannot hope to complete, I survey the outlines of a decision-theoretic framework on which a richer pragmatic epistemology can be developed. My hope is that this framework opens up new avenues of exploration for the pragmatic epistemologist. (shrink)

We investigate the conflict between the ex ante and ex post criteria of social welfare in a new framework of individual and social decisions, which distinguishes between two sources of uncertainty, here interpreted as an objective and a subjective source respectively. This framework makes it possible to endow the individuals and society not only with ex ante and ex post preferences, as is usually done, but also with interim preferences of two kinds, and correspondingly, to introduce interim forms of the (...) Pareto principle. After characterizing the ex ante and ex post criteria, we present a first solution to their conflict that extends the former as much possible in the direction of the latter. Then, we present a second solution, which goes in the opposite direction, and is also maximally assertive. Both solutions translate the assumed Pareto conditions into weighted additive utility representations, and both attribute to the individuals common probability values on the objective source of uncertainty, and different probability values on the subjective source. We discuss these solutions in terms of two conceptual arguments, i.e., the by now classic spurious unanimity argument and a novel informational argument labelled complementary ignorance. The paper complies with the standard economic methodology of basing probability and utility representations on preference axioms, but for the sake of completeness, also considers a construal of objective uncertainty based on the assumption of an exogeneously given probability measure. JEL classification: D70; D81. (shrink)

Nowadays, product labels are often used to enable consumers choose products that are friendly to the environment and to animals, natural, healthful and socially responsible. However, certain features of commonly used labels limit their usefulness. This thesis identifies a number of these limitations and presents an innovative labeling approach designed to address them. More specifically, the following features limit the usefulness of the commonly used “endorsement” labels: they (1) offer a single certification grade, the requirements for which (2) are ‘static’ (...) in the sense that certification standards do not depend on the evolution of the market, (3) are voluntary, and (4) are defined by stakeholders. Consequently, common labels fail to remove information asymmetry regarding the ethical performance of non-certified products; limit the opportunities for moderately –yet positively– concerned consumers to reveal ethical preferences; fail to motivate product improvement beyond certification standard; allow the emergence of a confusing variety of overlapping labels; and allow production stakeholders to resist socially desirable certification requirements when these are unfavorable to their business. In shoft, ethical labels currently fail to unleash on ethical aspects of production the inherently ‘free-market’ dynamics according to which products and firms must continuously innovate and improve, or else become obsolete and vanish. As an alternative, this thesis proposes and works out an innovative “comparative” labeling approach that is designed to address these limitations. The proposed type of label is (1) multi-grade or continuous, (2) dynamic, (3) mandatory, and (4) society-defined. An example of this type of label is given at Figure 1. Figure 1: Two variations of an example intuitive color-coded label format. The variations depict different sets of product attributes, and also different aggregation levels of the Environmental Impact attribute. This type of labeling could motivate the creation of a ‘vitruous cyrcle’ or ‘race to the top’, in which the ethical performance of products moves to the direction that society at large regards as ‘positive’. This process is outlined at Figure 2. Figure 2: Expected effects on the environmental performance of marketed product substitutes from the introduction of the proposed labeling system, in three phases. In Phase 1, the label is introduced on product substitutes available in the market (supply). In Phase 2, the supply evolves. To the standard (negative) incentives for cost minimization, are now added (positive) incentives to avoid negative reputation and to improve further the environmental frontiers of production through innovation. In Phase 3, the label is adjusted (updated) to the evolved supply. Products that failed to improve since last update might become downgraded (blue arrows). It is argued that the proposed labeling approach has the potential to boost ethical consumerism as a force for the ethical optimization of the market. This can be directly relevant to issues about which society is concerned, and democratically elected goverments have limited ability to regulate. Among possible uses of the method developed to assess the relative performance of substitute products, are the comparative ranking of presently available labels (so as to inform consumers on the relative impact of different certified products), the justification of the allocation of incentives and discincentives in state policy, and also the ethical optimization and promotion of own production by socially responsible suppliers. Overall, the described approach aspires to transform markets into instruments that work to the direction willed by society, so as to bring market-driven and continuous improvement for production aspects of societal concern, such as environmental and socioeconomic aspects of the real economy. (shrink)

According to normative decision theory there exists a principle of procedure invariance which states that a decision maker's preference order should remain the same, independently of which response mode is used. For example, the decision maker should express the same preference independently of whether he or she has to judge or decide. Nevertheless, previous research in behavioral decision making has suggested that judgments and choices yield different preference orders in both the risky and the riskless domain. In the latter, the (...) prominence effect has been demonstrated. The main purpose of the present series of experiments was to test cognitive explanations which account for the prominence effect. One of the explanations provided a psychological account based primarily on decision-strategy compatibility. Two other explanations built on information structuring approaches. In the first one, the general idea was that decision makers differentiate between alternatives by value and belief restructuring. In the second approach, violations of invariance were assumed to be attributed to the information structure of the task which in many cases demand problem simplification. A prominence effect was in most experiments found for both choices and preference ratings. This finding spöke against the strategy compatibility explanation. Instead, the different forms of cognitive restructuring provided a better account. However, none of these provided a single explanation. Yet, the structure compatibility explanation appeared to be the more viable one, in particular of the relation between experimentäl manipulations and response mode outcomes. The predictions of the value-belief restructuring explanation, on the other hand, seemed to be more valid for the prominence effect found in choice than for preference ratings. (shrink)

Humans and animals make inferences about the world under limited time and knowledge. In contrast, many models of rational inference treat the mind as a Laplacean Demon, equipped with unlimited time, knowledge, and computational might. Following H. Simon's notion of satisficing, the authors have proposed a family of algorithms based on a simple psychological mechanism: one-reason decision making. These fast and frugal algorithms violate fundamental tenets of classical rationality: They neither look up nor integrate all information. By computer simulation, the (...) authors held a competition between the satisficing "Take The Best" algorithm and various "rational" inference procedures. The Take The Best algorithm matched or outperformed all competitors in inferential speed and accuracy. This result is an existence proof that cognitive mechanisms capable of successful performance in the real world do not need to satisfy the classical norms of rational inference. (shrink)

We introduce a family of rules for adjusting one's credences in response to learning the credences of others. These rules have a number of desirable features. 1. They yield the posterior credences that would result from updating by standard Bayesian conditionalization on one's peers' reported credences if one's likelihood function takes a particular simple form. 2. In the simplest form, they are symmetric among the agents in the group. 3. They map neatly onto the familiar Condorcet voting results. 4. They (...) preserve shared agreement about independence in a wide range of cases. 5. They commute with conditionalization and with multiple peer updates. Importantly, these rules have a surprising property that we call synergy - peer testimony of credences can provide mutually supporting evidence raising an individual's credence higher than any peer's initial prior report. At first, this may seem to be a strike against them. We argue, however, that synergy is actually a desirable feature and the failure of other updating rules to yield synergy is a strike against them. (shrink)

We introduce a ranking of multidimensional alternatives, including uncertain prospects as a particular case, when these objects can be given a matrix form. This ranking is separable in terms of rows and columns, and continuous and monotonic in the basic quantities. Owing to the theory of additive separability developed here, we derive very precise numerical representations over a large class of domains (i.e., typically notof the Cartesian product form). We apply these representationsto (1)streams of commodity baskets through time, (2)uncertain social (...) prospects, (3)uncertain individual prospects. Concerning(1), we propose a finite horizon variant of Koopmans’s (1960) axiomatization of infinite discounted utility sums. The main results concern(2). We push the classic comparison between the exanteand expostsocial welfare criteria one step further by avoiding any expected utility assumptions, and as a consequence obtain what appears to be the strongest existing form of Harsanyi’s (1955) Aggregation Theorem. Concerning(3), we derive a subjective probability for Anscombe and Aumann’s (1963) finite case by merely assuming that there are two epistemically independent sources of uncertainty. (shrink)

When we ask a decision maker to express her preferences, it is typically assumed that we are eliciting a pre-existing set of preferences. However, empirical research has suggested that our preferences are often constructed on the fly for the decision problem at hand. This paper explores the ramifications of this empirical research for our understanding of instrumental rationality. First, I argue that these results pose serious challenges for the traditional decision-theoretic view of instrumental rationality, which demands global coherence amongst all (...) of one's beliefs and desires. To address these challenges, I first develop a minimal notion of instrumental rationality that issues in localized, goal-relative demands of coherence. This minimal conception of instrumental rationality is then used to offer a more sophisticated account of the global aspects of instrumental rationality. The resulting view abandons all-or-nothing assessments of rationality and allows us to evaluate decision makers as being rational to varying degrees. My aim is to propose a theory that is both psychologically and normatively plausible. (shrink)

Non-compensatory aggregation rules are applied in a variety of problems such as voting theory, multi-criteria analysis, composite indicators, web ranking algorithms and so on. A major open problem is the fact that non-compensability implies the analytical cost of loosing all available information about intensity of preference, i.e. if some variables are measured on interval or ratio scales, they have to be treated as measured on an ordinal scale. Here this problem has been tackled in its most general formulation, that is (...) when mixed measurement scales (interval, ratio and ordinal) are used and both stochastic and fuzzy uncertainties are present. Objectives of this article are first to present a comprehensive review of useful solutions already proposed in the literature and second to advance the state of the art mainly in the theoretical guarantee that weights have the meaning of importance coefficients and they can be summarized in a voting matrix. This is a key result for using non-compensatory Condorcet consistent rules. A proof on the probability of existence of ties in the voting matrix is also developed. (shrink)

This article argues that there is a natural solution to carry out interpersonal comparisons of utility when the theory of gambles is supplemented with a group operation of joint receipts. If so, three types of people can exist, and the two types having multiplicative representations of joint receipt have, in contrast to most utility theories, absolute scales of utility. This makes possible, at least in principle, meaningful interpersonal comparisons of utility with desirable properties, thus resolving a long standing philosophical problem (...) and having potentially important implications in economics. Two behavioral criteria are given for the three classes of people. At this point the relative class sizes are unknown. (shrink)

Fairness can be incorporated into Harsanyi’s utilitarianism through all-inclusive utility. This retains the normative assumptions of expected utility and Pareto-efficiency, and relates fairness to individual preferences. It makes utilitarianism unfalsifiable, however, if agents’ all-inclusive utilities are not explicitly specified. This note proposes a two-stage model to make utilitarian welfare analysis falsifiable by specifying all-inclusive utilities explicitly through models of individual fairness preferences. The approach is applied to include fairness in widely discussed allocation examples.

Heuristics are efficient cognitive processes that ignore information. In contrast to the widely held view that less processing reduces accuracy, the study of heuristics shows that less information, computation, and time can in fact improve accuracy. We review the major progress made so far: the discovery of less-is-more effects; the study of the ecological rationality of heuristics, which examines in which environments a given strategy succeeds or fails, and why; an advancement from vague labels to computational models of heuristics; the (...) development of a systematic theory of heuristics that identifies their building blocks and the evolved capacities they exploit, and views the cognitive system as relying on an “adaptive toolbox;” and the development of an empirical methodology that accounts for individual differences, conducts competitive tests, and has provided evidence for people’s adaptive use of heuristics. Homo heuristicus has a biased mind and ignores part of the available information, yet a biased mind can handle uncertainty more efficiently and robustly than an unbiased mind relying on more resource-intensive and general-purpose processing strategies. (shrink)

Since the middle of this century, the dominant prescriptive approach to decision theory has been a deductive viewpoint which is concerned with axioms of rational preference and their consequences. After summarizing important problems with the preference primitive, this paper argues for a constructive approach in which information is the foundation for decision-making. This approach poses comparability of uncertain acts as a question rather than an assumption. It is argued that, in general, neither preference nor subjective probability can be assumed given, (...) and that these need to be generated by using the relevant information available to the decision-agent in a given situation. A specific constructive model is discussed and illustrated with a real example from this viewpoint. (shrink)

Many philosophers hold that for various reasons there must be psychological laws governing beliefs and desires. One of the few serious examples that they offer is the _belief-desire law_, which states, roughly, that _ceteris paribus_ people do what they believe will satisfy their desires. This paper argues that, in fact, there is no such law. In particular, decision theory does not support the contention that there is such a law.

Altruism is a popular economic explanation for a wide range of pro-social decisions and actions. It has been applied frequently in several different streams of literature, and is a descriptively compelling model of behavior. This paper provides a theoretical framework for the existence of ordinal and cardinal altruistic value functions, as well as altruistic utility functions, based on an altruistic preference relation. Representation theorems are developed to specify relatively weak conditions under which altruistic value and utility functions can be shown (...) to exist. In addition, conditions that lead to additive forms of these functions are provided. (shrink)

The standard Bayesian recipe for selecting the rational choice is presented. A familiar example in which the recipe fails to produce any definite result is introduced. It is argued that a generalization of Gärdenfors’ and Sahlin’s theory of unreliable probabilities — which itself does not guarantee a solution to the problem — offers the best available approach. But a number of challenges to this approach are also presented and discussed.

Elicitation methods in decision-making under risk allow us to infer the utilities of outcomes as well as the probability weights from the observed preferences of an individual. An optimally efficient elicitation method is proposed, which takes the inevitable distortion of preferences by random errors into account and minimizes the effect of such errors on the inferred utility and probability weighting functions. Under mild assumptions, the optimally efficient method for eliciting utilities and probability weights is the following three-stage procedure. First, a (...) probability is elicited whose subjective weight is one half. Second, the utility function is elicited through the midpoint chaining certainty equivalent method using the probability elicited at the first stage. Finally, the probability weighting function is elicited through the probability equivalent method. (shrink)

Daniel Ellsberg presented in Ellsberg various examples questioning the thesis that decision making under uncertainty can be reduced to decision making under risk. These examples constitute one of the main challenges to the received view on the foundations of decision theory offered by Leonard Savage in Savage. Craig Fox and Amos Tversky have, nevertheless, offered an indirect defense of Savage. They provided in Fox and Tversky an explanation of Ellsberg’s two-color problem in terms of a psychological effect: ambiguity aversion. The (...) ‘comparative ignorance’ hypothesis articulates how this effect works and explains why it is important to an understanding of the typical pattern of responses associated with Ellsberg’s two-color problem. In the first part of this article we challenge Fox and Tversky’s explanation. We present first an experiment that extends Ellsberg’s two-color problem where certain predictions of the comparative ignorance hypothesis are not confirmed. In addition the hypothesis seems unable to explain how the subjects resolve trade-offs between security and expected pay-off when vagueness is present. Ellsberg offered an explanation of the typical behavior elicited by his examples in terms of these trade-offs and in section three we offer a model of Ellsberg’s trade-offs. The model takes seriously the role of imprecise probabilities in explaining Ellsberg’s phenomenon. The so-called three-color problem was also considered in Fox and Tversky. We argue that Fox and Tversky’s analysis of this case breaks a symmetry with their analysis of the two-color problem. We propose a unified treatment of both problems and we present a experiment that confirms our hypothesis. (shrink)

Ruth Chang and Joseph Raz have both drawn far-reaching consequences for agency from the phenomenon of incommensurability. After criticizing their arguments, I outline an alternative view: if incommensurability is vagueness, then there are no substantial implications for agency, except perhaps a limited form of naturalistic voluntarism if our reasons are provided by desires.

Nearly all students believe academic cheating is wrong, yet few students say they would report witnessed acts of cheating. To explain this apparent tension, the present research examined college students’ reasoning about whether to report plagiarism or other forms of cheating. Study 1 examined students’ conflicts when deciding whether to report cheating. Most students gave reasons against reporting a peer (e.g., social and physical consequences, a lack of responsibility to report) as well as reasons in favor of reporting (e.g., concerns (...) about welfare, justice, and fairness). Study 2 provided experimental confirmation that the contextual factors referenced by Study 1 participants in fact influenced decisions about whether to report cheating. Overall, the findings indicate that students often decide against reporting peers’ acts of cheating, though not due to a lack of concern about integrity. Rather, students may refrain from reporting because of conflicting concerns, lack of information about school policy, and perceived better alternatives to reporting. (shrink)

This paper argues that any specific utility or disutility for gambling must be excluded from expected utility because such a theory is consequential while a pleasure or displeasure for gambling is a matter of process, not of consequences. A (dis)utility for gambling is modeled as a process utility which monotonically combines with expected utility restricted to consequences. This allows for a process (dis)utility for gambling to be revealed. As an illustration, the model shows how empirical observations in the Allais paradox (...) can reveal a process disutility of gambling. A more general model of rational behavior combining processes and consequences is then proposed and discussed. (shrink)

We sometimes seem to face fundamental moral uncertainty, i.e., uncertainty about what is morally good or morally right that cannot be reduced to ordinary descriptive uncertainty. This phenomenon raises a puzzle for noncognitivism, according to which moral judgments are desire-like attitudes as opposed to belief-like attitudes. Can a state of moral uncertainty really be a noncognitive state? So far, noncognitivists have not been able to offer a completely satisfactory account. Here, we argue that noncognitivists should exploit the formal analogy between (...) moral uncertainty and moral multi-objective decision problems. Our ‘multi-objective story’ enables noncognitivists to save our moral uncertainty thought and talk by explaining how the underlying phenomenon could be noncognitive. (shrink)

In this contribution, we set out a framework for ethical research and innovation. Our framework draws upon recent scholarly work recommending the introduction of new models at the intersection of ethics, strategy, and science and technology studies to inform and explicate how the decisions of researchers can be considered ethical. Ethical research and innovation is construed in our framework as a dynamic process emerging from decisions of multiple stakeholders in innovation ecosystems prior to, during and after the execution of a (...) research and innovation project. The framework can be used by different types of research organizations to implement governance models of ethical research and innovation. (shrink)

How can it be rational to work on a new theory that does not yet meet the standards for good or acceptable theories? If diversity of approaches is a condition for scientific progress, how can a scientific community achieve such progress when each member does what it is rational to do, namely work on the best theory? These two methodological problems, the problem of pursuit and the problem of diversity, can be solved by taking into account the cognitive risk that (...) is involved in theory choice. I compare this solution to other proposals, in particular T. S. Kuhn's and P. Kitcher's view that the two problems demonstrate the epistemic significance of the scientific community. (shrink)

This chapter addresses the problem of ranking available drugs in guideline development to support clinicians in their work. Based on a pragmatic approach to the notion of evidence and a hierarchical view on different kinds of evidence this chapter introduces a decision aid, HiDAD, which draws on the multi criteria decision making literature. This decision aid implements the wide-spread intuition that there are different kinds of evidence with varying degrees of importance by relying on a strict ordinal ordering of kinds (...) of evidence. In order to construct a ranking every pair of drugs is first compared separately on all kinds of evidence. Next, these quantitative comparisons are then aggregated into an overall comparison between drugs based on all the available evidence in a way which avoids that evidence of less importance is trumped by evidence of the higher levels. Finally, these overall comparisons are used to determine the final ranking of drugs which then informs the process of guideline writing. Properties, modifications and applicability of the decision aid HiDAD are discussed and assessed. (shrink)

In the paper we consider an electricity provider company that makes decision on allocating resources on electric network maintenance. The investments decrease malfunction rate of network nodes. An accidental event or a malfunctioning on underground system can have various consequences and in different perspectives, such as deaths and injuries of pedestrians, fires in nearby locations, disturbances in the flow of vehicular traffic, loss to the company image, operating and financial losses, etc. For this reason it is necessary to apply an (...) approach of the risk management that considers the multidimensional view of the consequences. Furthermore an analysis of decision making should consider network dependencies between the nodes of the electricity distribution system. In the paper we propose the use of the simulation to assess the network effects in the multidimensional risk assessment in electricity grid. The analyzed effects include node overloading due to malfunction of adjacent nodes and blackouts that take place where there is temporarily no path in the grid between the power plant and a node. The simulation results show that network effects have crucial role for decisions in the network maintenance – outcomes of decisions to repair a particular node in the network can have significant influence on performance of other nodes. However, those dependencies are non-linear. The effects of network connectivity on its multidimensional performance assessment depend heavily on the overloading effect level. The simulation results do not depend on network type structure – however simulation outcomes for random networks have shown higher variance compared to small-world networks. (shrink)

For decisions whose consequences accrue over time, there are several possible techniques to compute total utility. One is to discount utilities of future consequences at some appropriate rate. The second is to discount per-period certainty equivalents. And the third is to compute net present values (NPVs) of various possible streams and to then apply the utility function to these net present values. We find that the best approach is to first compute NPVs of various possible income streams and then take (...) the utility of such NPVs. We show the drawbacks of other alternative models of evaluating income streams. The article discusses the advantages of the power and logarithmic forms in the modeling of time preference. These are the only forms for which utility of income and utility of consumption are strategically equivalent. Further, these forms permit the flexibility in the choice of a time period (e.g., monthly or quarterly) without modifying the utility function, thus simplifying analysis. (shrink)

One resolution of the St. Petersburg paradox recognizes that a gamble carries a risk sensitive to the gamble's stakes. If aversion to risk increases sufficiently fast as stakes go up, the St. Petersburg gamble has a finite utility.

We present a method to characterize the preferences of a decision maker in decisions with multiple attributes. The approach modifies the outcomes of a multivariate lottery with a multivariate transformation and observes the change in the decision maker’s certain equivalent. If the certain equivalent follows this multivariate transformation, we refer to this situation as multiattribute transformation invariance, and we derive the functional form of the utility function. We then show that any additive or multiplicative utility function that is formed of (...) continuous and strictly monotonic utility functions of the individual attributes must satisfy transformation invariance with a multivariate transformation. This result provides a new interpretation for multiattribute utility functions with mutual utility independence as well as a necessary and sufficient condition that must be satisfied when assuming these widely used functional forms. We work through several examples to illustrate the approach. (shrink)

We propose a descriptive version of the classical multi-attribute utility model; to that end, we add a new parameter, momentary salience, to the customary formulation. The addition of this parameter allows the theory to accommodate changes in the decision maker’s mood and circumstances, as the saliencies of anticipated consequences are driven by concerns of the moment. By allowing for the number of consequences given attention at the moment of decision to vary, the new model mutes the criticism that SEU models (...) call for an omniscient decision maker. Use of the model is illustrated with a large-scale longitudinal study showing that adolescent smokers have higher utility for smoking than nonsmokers. We also propose to use the model hierarchically to describe everyday decisions that people deal with repeatedly. Big decisions, which set policy, guide a host of nested little decisions, which in turn lead to action. For a little decision, one of the options will be consistent with the policy, and will inherit its high utility. Accordingly, most little decisions will be made quickly and will follow the policy. However, people do sometimes decide to violate their own policies, and we describe how these lapses can lead to collapse of the policy. (shrink)

Inspired by the operation of human social organisation, this paper presents a new architecture—a pyramid-committee—for developing society-oriented intelligence, whose structure imitates the organisation of human society in its decision making. The system takes a pyramid-like hierarchical structure with links in the pyramid forming a semi-lattice, which relate not only to nodes in the same layer, but also to others in different layers. The output of the system is a result of the negotiation and balancing of different interests. For such a (...) system to function, the main difficulties concern the complicated relationships between different factors or agents. Focussing on the airport environment audit, we discuss the development of a model framework and the role of neural networks. (shrink)