Risk, Ambiguity and Decision

Daniel Ellsberg was a strategic analyst with the RAND Corporation, and a defense department and state department official who served in Vietnam. He later revealed to the U.S. Senate and the press the Pentagon Papers, a 7,000 page top secret study of U.S. decision making in Vietnam from 1945 to 1968. For this he faced a trial and a sentence of 115 years in prison, but all charges were dismissed on grounds of gross governmental misconduct against him, which led to the conviction of a number of White House aids and figured in the impeachment proceedings against President Nixon.

"Ellsberg's dissertation is a major landmark in the history of decision research. The issues that it raised and clarified have inspired scholars for decades, and will continue to do so." -- Daniel Kahneman, Princeton University"I think a published version would be a valuable resource, not only as a historical document, but also for still fresh ideas." -- Dick Jeffrey, Princeton University"Daniel Ellsberg set the world of decision theorists on its ear when he introduced the distinction between risk and ambiguity in his article excerpted from his dissertation. The clear convincing example caused a fundamental shift in thinking and in many ways led to the subsequent studies of decision and judgment by cognitive psychologists which, in turn, are having an increasing influence in the analysis of economic phenomena. It is good to have the complete text available to us at last." -- Kenneth J. Arrow, Stanford University, Emeritus

• Acknowledgments; Note to Reader; Foreword, Isaac Levi ; 1. Ambiguity and Risk; Vagueness, Confidence, and the Weight of Arguments; The Nature and Uses of Normative Theory; The Validation of Normative Propositions; The Utility Axioms as Norms; Normative Theory and Empirical Research; 2. The Bernoulli Proposition; A Possible Counterexample: Are there Uncertainties that are Not Risks?; Vulgar Evaluations of Risk; 3. The Measurement of Definite Opinions; von Neumann-Morgenstern Utilities; Probability as Price; "Coherence" and "Definiteness" of Probability-Prices; Appendix to Chapter Three; On Making a Fool of Oneself: The Requirement of Coherence; Acceptable Odds: Definite, Coherent, and Otherwise; 4. Opinions and Actions: Which Come First?; The Logic of Degrees of Belief; Opinions that Make Horse Races; Postulate 2: the "Sure-Thing Principle"; Intuitive Probabilities and "Vagueness"; Appendix to Chapter Four; The Savage Postulates; The Koopman Axioms; 5. Uncertainties that are Not Risks; The "Three-Color Urn" Example; Vulgar Evaluations of Ambiguity; Appendix to Chapter Five; 6. Why Are Some Uncertainties Not Risks?; Decision Criteria for "Complete Ignorance"; Decision Criteria for "Partial Ignorance"; 7. The "Restricted Hurwicz Criterion"; The "Restricted Bayes/Hurwicz Criterion"; Boldness and Prudence: the "n-Color Urn" Example; Ignorance, Probability, and Varieties of Gamblers; 8. Ambiguity and the Utility Axioms; The Pratt/Raiffa Criticisms and the Value of Randomization; Rubin's Axiom; Allais and the Sure-Thing Principle; Winning at Russian Roulette; Bibliography