Anxiety and Decision Making with Delayed Resolution of Uncertainty
 George Wu
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Abstract
In many realworld gambles, a nontrivial amount of time passes before the uncertainty is resolved but after a choice is made. An individual may have a preference between gambles with identical probability distributions over final outcomes if they differ in the timing of resolution of uncertainty. In this domain, utility consists not only of the consumption of outcomes, but also the psychological utility induced by an unresolved gamble. We term this utility anxiety. Since a reflective decision maker may want to include anxiety explicitly in analysis of unresolved lotteries, a multipleoutcome model for evaluating lotteries with delayed resolution of uncertainty is developed. The result is a rankdependent utility representation (e.g., Quiggin, 1982), in which period weighting functions are related iteratively. Substitution rules are proposed for evaluating compound temporal lotteries. The representation is appealing for a number of reasons. First, probability weights can be interpreted as the cognitive attention allocated to certain outcomes. Second, the model disaggregates strength of preference from temporal risk aversion and thus provides some insight into the old debate about the relationship between von Neumann–Morgenstern utility functions and strength of preference value functions.
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 Title
 Anxiety and Decision Making with Delayed Resolution of Uncertainty
 Journal

Theory and Decision
Volume 46, Issue 2 , pp 159199
 Cover Date
 19990401
 DOI
 10.1023/A:1004990410083
 Print ISSN
 00405833
 Online ISSN
 15737187
 Publisher
 Kluwer Academic Publishers
 Additional Links
 Topics
 Keywords

 Decision analysis
 Risk theory
 Delayed resolution of uncertainty
 Rankdependent utility
 Stochastic stationarity
 Industry Sectors
 Authors

 George Wu ^{(1)}
 Author Affiliations

 1. Graduate School of Business, The University of Chicago, 1101 East 58th Street, Chicago, IL, 60637, USA Phone