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On Solving Some Paradoxes Using the Ordered Weighted Averaging Operator Based Decision Model



In real life, people often need to make decisions in face of uncertainty. The traditional approach to rational decision making under uncertainty is the theory of expected utility. However, the Ellsberg paradox shows that the preference pattern exhibited by ordinary people often violates the expected utility theory. Similar to the Ellsberg paradox, Machina proposes two additional paradoxes, which challenge various important nonexpected utility models developed in the literature. This paper attempts to provide a unified treatment of all these paradoxes by extending the ordered weighted averaging operator based decision model to allow the degree of optimism to take multiple values instead of a single value.