Risk, ambiguity and quantum decision theory

TL;DR

This paper applies quantum formalism to decision theory, modeling risk and ambiguity effects by incorporating quantum interference into probability calculations, leading to a modified expected utility formula.

Contribution

It introduces a novel approach using quantum interference to model probabilities in decision theory, extending classic expected utility with an uncertainty utility term.

Findings

Quantum interference modifies probability estimates in decision making.

Expected utility can be adjusted with a quantum-based uncertainty term.

The approach offers a new perspective on risk and ambiguity effects.

Abstract

In the present article we use the quantum formalism to describe the effects of risk and ambiguity in decision theory. The main idea is that the probabilities in the classic theory of expected utility are estimated probabilities, and thus do not follow the classic laws of probability theory. In particular, we show that it is possible to use consistently the classic expected utility formula, where the probability associated to the events are computed with the equation of quantum interference. Thus we show that the correct utility of a lottery can be simply computed by adding to the classic expected utility a new corrective term, the uncertainty utility, directly connected with the quantum interference term.