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Behavioral Decision Making With Combined States Under Imperfect Information

Author

Listed:
  • RAFIK A. ALIEV

    (Department of Business Administration, Azerbaijan State Oil Academy, Azadlig ave., 20, Baku, AZ1010, Azerbaijan)

  • WITOLD PEDRYCZ

    (Department of Electrical & Computer Engineering, University of Alberta, Edmonton AB T6R 2G7, Canada;
    System Research Institute, Polish Academy of Sciences Warsaw, Poland)

  • OLEG H. HUSEYNOV

    (Department of Computer-Aided Control Systems, Azerbaijan State Oil Academy, Baku, Azerbaijan)

Abstract

Behavioral decision making is an area of multidisciplinary research attracting growing interest of scientists and practitioners, economists, and business people. A wide spectrum of successful theories is present now, including Prospect theory, multiple priors models, studies on altruism, trust and fairness. However, these theories are developed for precise and complete information, whereas real information concerning a decision maker's (DM) behavior and environment is imperfect, qualitative, and, as a result, often described in natural language (NL). We suggest an approach based on modeling a DM's behavior by a set of states. Each state represents a certain principal behavior. In our approach, states of nature and DM's states constitute a single space of combined states. For formalizing relevant information described in NL, we use fuzzy set theory. The utility model is based on Choquet-like integration over combined states. The investigations show that Expected Utility, Choquet Expected Utility and Cumulative Prospect Theory are special cases of the suggested approach. We apply the suggested approach to solving a benchmark and a real-life decision problem. The obtained results show validity of the suggested approach.

Suggested Citation

  • Rafik A. Aliev & Witold Pedrycz & Oleg H. Huseynov, 2013. "Behavioral Decision Making With Combined States Under Imperfect Information," International Journal of Information Technology & Decision Making (IJITDM), World Scientific Publishing Co. Pte. Ltd., vol. 12(03), pages 619-645.
    • Handle: RePEc:wsi:ijitdm:v:12:y:2013:i:03:n:s0219622013500235
    DOI: 10.1142/S0219622013500235
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    Citations

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    Cited by:

    1. Nihad Aliyev, 2019. "Financial Markets with Multidimensional Uncertainty," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 2-2019, January-A.
    2. R. A. Aliev & O. H. Huseynov & R. Serdaroglu, 2016. "Ranking of Z-Numbers and Its Application in Decision Making," International Journal of Information Technology & Decision Making (IJITDM), World Scientific Publishing Co. Pte. Ltd., vol. 15(06), pages 1503-1519, November.
    3. Nihad Aliyev & Xue-Zhong He, 2016. "Toward a General Model of Financial Markets," Research Paper Series 371, Quantitative Finance Research Centre, University of Technology, Sydney.

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