Risk and decisions - selected theories

Author: T. Cyrul

The paper reviews the main empirical findings and theoretical models proposed to explain the findings in decision literature, namely: theory of expected utylity (von Neumann & Morgenstern 1944), the main its extension e.g. prospect theory (Kahneman & Tversky 1979) and its successor cumulative prospect theory (Tversky & Kahneman 1992), rank dependent utility theory (Quiggin 1982) and dual theory (Yaari 1987) 1987).

Description of the decision issue is presented in two interchangable conventions e.g. as a lottery and as an action e.g. a function on the states of nature.

Out of the three decision aspects e.g. decision under certainty, decision under uncertainty and decision under risk, in the paper concentration was set on the third aspect of decision.