Taking Risks, With and Without Probabilities

Some hold that expected utility is too restrictive in the way it handles risk. Risk-weighted expected utility is an alternative that allows decision-makers to have a range of attitudes toward probabilistic risk. It holds that any attitude within this range is instrumentally rational, since these attitudes represent different, equally good, strategies for taking the means to one's ends. A different challenge to expected utility is that it is too restrictive in the way it handles ambiguity—it requires decision-makers to have sharp probabilities—and risk-weighted expected utility shares this restrictive feature. This paper presents a generalization of risk-weighted expected utility which allows for ambiguity. It defends this theory as a theory of instrumental rationality, and argues that attitudes toward risk and attitudes toward ambiguity each represent different but important features of instrumental rationality.