Cases and Scenarios in Decisions Under Uncertainty

49 Pages Posted: 7 Apr 2017

See all articles by Itzhak Gilboa

Itzhak Gilboa

Tel Aviv University - Eitan Berglas School of Economics; HEC Paris - Economics & Decision Sciences

Stefania Minardi

HEC Paris - Economics & Decision Sciences

Larry Samuelson

Yale University - Department of Economics; Yale University - Cowles Foundation

Date Written: March 17, 2017

Abstract

We offer a model that combines and generalizes case-based decision theory and expected utility maximization. It is based on the premise that an agent looks ahead and assesses possible future scenarios, but may not know how to evaluate their likelihood and may not be sure that the set of scenarios is exhaustive. Consequently, she also looks back at her memory for past cases, and makes decisions so as to maximize a combined function, taking into account both scenarios and cases. We allow for non-additive set functions, both over future scenarios and over past cases, to capture (i) incompletely specified or unforeseen scenarios, (ii) ambiguity, (iii) the absence of information about counterfactuals, and (iv) some forms of case-to-rule induction ("abduction") and statistical inference. We axiomatize this model. Learning in this model takes several forms, and, in particular, changes the relative weights of the two forms of reasoning.

Suggested Citation

Gilboa, Itzhak and Minardi, Stefania and Samuelson, Larry, Cases and Scenarios in Decisions Under Uncertainty (March 17, 2017). HEC Paris Research Paper No. ECO/SCD-2017-1200. Available at SSRN: https://ssrn.com/abstract=2948253 or http://dx.doi.org/10.2139/ssrn.2948253

Itzhak Gilboa (Contact Author)

Tel Aviv University - Eitan Berglas School of Economics ( email )

P.O. Box 39040
Ramat Aviv, Tel Aviv, 69978
Israel
972-3-640-6423 (Phone)
972-3-640-9908 (Fax)

HEC Paris - Economics & Decision Sciences

Paris
France

Stefania Minardi

HEC Paris - Economics & Decision Sciences ( email )

Paris
France

Larry Samuelson

Yale University - Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

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