THE EFFECTS OF PROBABILITY AMBIGUITY ON PREFERENCES FOR UNCERTAIN 2-OUTCOME PROSPECTS

Many studies have investigated judgment and decision making under unce rtainty (i.e., when the possible outcomes of a given alternative occur with some known exact probability between 0 and 1). Fewer studies, ho wever, have investigated judgment and decision making in which the pro babilities associated with different outcomes are ambiguous (i.e., kno wn to be in a certain interval such as .40-.60, rather than known to b e a specific value such as .50). Judgment under both uncertainty and a mbiguity was investigated by having subjects evaluate two-outcome pros pects that varied in expected value, level of probability ambiguity, a nd the center of the ambiguous probability range. Results indicated a preference for unambiguous probabilities when the probability of obtai ning the better outcome was .50 or greater and a preference for a smal l amount of ambiguity when the probability of obtaining the better out come was moderately low (.30).