Exploring the external validity of a subjectively weighted utility model of decision making

Abstract

The purpose of this study was to explore empirically whether in Karmarkar, 1978, Karmarkar, 1979, 24, 67–72) Subjectively Weighted Utility (SWU) model of decision making the parameter a can be correctly regarded as a measure of uncertainty about outcome probabilities. According to this interpretation the SWU model predicts that in some situations (.5 < pi < 1.0) decision makers will prefer choice alternatives with the least amount of outcome probability uncertainty, while in other situations (.0 < pi < .5) they will prefer choice alternatives with the greatest amount of outcome probability uncertainty. Subjects made a series of choices about gambles they preferred to play at each of three different estimated probability levels (.8, .5, and .2). At each level, there were two gambles varying in the extent to which they made the subjects uncertain about the probability of winning a monetary prize. Contrary to what the model predicted, the subjects demonstrated a clear preference for playing the less uncertain gamble at each estimated probability level. These findings were discussed in terms of both their implication for the external validity of the SWU model, and their implication for a general understanding of the role of outcome probability uncertainty in decision making.