6 research outputs found
Investment under ambiguity with the best and worst in mind
Recent literature on optimal investment has stressed the difference between the impact of risk and the impact of ambiguity - also called Knightian uncertainty - on investors' decisions. In this paper, we show that a decision maker's attitude towards ambiguity is similarly crucial for investment decisions. We capture the investor's individual ambiguity attitude by applying alpha-MEU preferences to a standard investment problem. We show that the presence of ambiguity often leads to an increase in the subjective project value, and entrepreneurs are more eager to invest. Thereby, our investment model helps to explain differences in investment behavior in situations which are objectively identical
How brains make decisions
This chapter, dedicated to the memory of Mino Freund, summarizes the Quantum
Decision Theory (QDT) that we have developed in a series of publications since
2008. We formulate a general mathematical scheme of how decisions are taken,
using the point of view of psychological and cognitive sciences, without
touching physiological aspects. The basic principles of how intelligence acts
are discussed. The human brain processes involved in decisions are argued to be
principally different from straightforward computer operations. The difference
lies in the conscious-subconscious duality of the decision making process and
the role of emotions that compete with utility optimization. The most general
approach for characterizing the process of decision making, taking into account
the conscious-subconscious duality, uses the framework of functional analysis
in Hilbert spaces, similarly to that used in the quantum theory of
measurements. This does not imply that the brain is a quantum system, but just
allows for the simplest and most general extension of classical decision
theory. The resulting theory of quantum decision making, based on the rules of
quantum measurements, solves all paradoxes of classical decision making,
allowing for quantitative predictions that are in excellent agreement with
experiments. Finally, we provide a novel application by comparing the
predictions of QDT with experiments on the prisoner dilemma game. The developed
theory can serve as a guide for creating artificial intelligence acting by
quantum rules.Comment: Latex file, 20 pages, 3 figure
Unforeseen contingencies
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Unforeseen contingencies
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