Research On Decision Theory With A Modal Of Decision Under Uncertainty

According to Knight's classification of risk and uncertainty, two branches of decision theory, decision under risk and decision under uncertainty, were derived. Two methodologies, normative and descriptive are applied.In the first chapter of this paper, a synthetic analysis of Expected Utility Theory, Prospect Theory and Subjective Expected Utility Theory is presented with the contrast and compare of the corresponding part of those theories.In chapter two, the weakness of the theories and some paradoxes are elaborated. And a critical proof is given which shows there exists a logical paradox in prospect theory.In Chapter three, a new classification of risk and uncertainty is defined. Based on that a model of decision under uncertainty is established to explain decision problems when the decision maker is facing uncertainty, among which is the famous Ellsberg Paradox.