Decision making with unreliable probabilities
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TL;DR
A decision theory is presented which allows subjects to account for the uncertainties of their probability estimates by modelling beliefs about states of nature by means of a class of probability measures and a measure of epistemic reliability is introduced.
Abstract
This paper presents a decision theory which allows subjects to account for the uncertainties of their probability estimates. This is accomplished by modelling beliefs about states of nature by means of a class of probability measures. In order to represent uncertainties of those beliefs a measure of epistemic reliability is introduced. The suggested decision theory is evaluated in the light of empirical evidence on ambiguity and uncertainty in decision making. The theory is also compared to Tversky & Kahneman's prospect theory.