New study reveals why we hate uncertainty and how it affects decisions
Subjects often struggle to assess the likelihood of uncertain events, which are called 'ambiguous'. They tend to avoid options that depend on these ambiguous events, showing 'ambiguity aversion'. Decision theorists have developed models like Choquet-expected utility and maxmin expected utility to explain and accommodate ambiguity and ambiguity aversion since the mid-1980s. Recent advancements in the theory of ambiguity have also been summarized.