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Probabilistic decision making
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2. A list of finite or infinite number of possible courses of action is available to each player
3. A play is played when each player chooses one of his courses of action. The courses are assumed to be made simultaneously, so that no player knows his opponent’s choice until he has decided his course of action.
4. Every player i.e, combination of course of action is associated with an outcome, known as the pay off generally money, which determines a set of gains, one to each player. Here a loss is attributed to a negative gain.
9. Not cutting wages.From this situation, game theory was used to narrow down the cases that needed to be analyzed. Game theory provided a clear perspective on the likelihood of a strike and then a Decision analysis was used to get an optimal solution on the expected value alternative course of action as described in the block diagram.<br />Taking another example of making probabilistic decision making under uncertainty we can more understand this concept.<br />Subject images and feeling towards winning a lottery are likely to be the same whether the chance of winning is 1 on 1 million. Emotions in uncertain or risky situations seem to be sensitive to the possibility rather than the probability of strong positive or negative consequences, causing an overweight of very small probabilities-Loewenstein et al., 2001. Rottenstreich and Hsee (2001) found that the strong sensitivity to departure from impossibility and certainty and the insensitivity to changes in probability within a broad midrange of values is<br />even more dramatic for affect favorable for affect no favorable outcomes. <br />Introduction to Contextual variables lead to proximity of outcomes and see how choices affect them. Proximity variable can be defined over different dimensions like temporal, spatial and social factors. Proximity measures should not have any impact on a cognitive-driven decision process; however, they could play a role in affective driven one. The laboratory experimental method seems to be the most appropriate way to assess the impact of proximity on choices under uncertainty. In fact, relying on field data makes it disentangle, the impact that proximity has on the cognitive perception of risk and impact of proximity on choices under uncertainty. In fact relying on field data makes it disentangle, the impact it has on proximity of its cognitive perception of risk and impact that it has on the emotional system. When contextual aspect is considered many researchers question on do risk preferences change according to how outcomes are usually described? Do risk preferences change whether the resolution of uncertainty is immediate or delayed? Are the risk choices affected by the presence of other people at the moment of decision or at the moment of uncertainty resolution?<br />This paper is mainly concerned with empirical nature of the probabilistic decision making. The above mentioned examples provided the theoretical contributions to the economics and social psychology with the objective to develop a systematic approach and method to develop an empirical and theory validation model. This paper made me learn and go through various articles, journals and books from British council library pertaining to the decision making analysis and statistics journals and books helped on probabilistic decision making. However, this topic not only made me learn the existing theory but also the way these theories are involved in probabilistic decision making under risk and uncertainty of various dimensions.<br />A potentially useful and relatively unexplored source of data comes from websites where decisions under risk and uncertainty made me understand the most common and prevalent on line gambling which falls under probabilistic decision making.<br />Results:<br />Emotions are the fundamental element for decision making under risk and uncertainty. The way this paper was analyzed with emotions while making decision under risk and uncertainty made me feel a lot about how decision were made and how should decision be made in future concerning various parameters and emotional constraints.<br />References:<br />Operations Research –Prof .V.Sundaresan, Prof.K.S Ganapathy Subramanian, Prof.K.Ganesan<br />Miller and Freund’s Probability and Statistics for Engineers Edition 7<br />Operations Research – Taha edition 6<br />CSS online tutorial<br />Mellers, B.A., Schwartz, A., Ho, K., and Ritov, I. (1997). Decision affect theory: emotional reactions to the outcomes of risky options.<br />Mano, H. (1994). Risk-Taking, Framing Effects, and Affect. Organizational Behavior<br />and Human Decision Processes.<br />O'Donoghue, T. and Rabin, M. (2000). The Economics of Immediate Gratification.<br />Journal of Behavioral Decision Making.<br />Rubinstein, A. (2003). Instinctive and Cognitive Reasoning: A study of Response<br />Times. 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The influence of positive affect on acceptable level<br />of risk: the person with a large canoe has a large worry. Organizational Behavior and<br />Human Decision Processes, 39, 145-154.<br />Elster, J. (1998). Emotions and Economic Theory. Journal of Economic Literature,<br />36, 47-74.<br />Frank, R.H. (1988). Passions within reason: the strategic role of the emotions. New York:<br />W.W. Norton.<br />Bell, D.E. (1985). Disappointment in decision making under uncertainty. Operations<br />Research, 33, 1-27.<br />Bell, D.E. (1982). Regret in decision making under uncertainty. Operations Research,<br />30, 961-981.<br />