Aligning Uncertainty and Ambiguity in Decision Analysis With Contemporary Risk Conceptualizations: Insights From the Ellsberg Paradox and Related Concepts

One of the most well-known foundational concepts in decision analysis is the Ellsberg paradox. It shows that people prefer alternatives where the probabilities are objective compared to alternatives where the probabilities are vague (uncertain, ambiguous). This fact challenges the expected utility theory, which is founded on the idea that people base their decisions on probabilities and utilities of different outcomes. This article discusses this paradox and other similar decision analysis concepts and observations in relation to risk science and contemporary knowledge on how to conceptualize and characterize risk. The main aim of the article is to show that the Ellsberg paradox and related concepts and observations reinforce contemporary risk conceptualizations with their idea of seeing uncertainty as a main component of risk.