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Act similarity in case-based decision theory (*)

Author

Listed:
  • Itzhak Gilboa

    (KGSM-MEDS, Northwestern University, Leverone Hall, Evanston, IL 60208, USA)

  • David Schmeidler

    (Tel Aviv University and Ohio State University, Department of Economics, Arps Hall, 1945 N. High St., Columbus, OH 43210, USA)

Abstract

Case-Based Decision Theory (CBDT) postulates that decision making under uncertainty is based on analogies to past cases. In its original version, it suggests that each of the available acts is ranked according to its own performance in similar decision problems encountered in the past. The purpose of this paper is to extend CBDT to deal with cases in which the evaluation of an act may also depend on past performance of different, but similar acts. To this end we provide a behavioral axiomatic definition of the similarity function over problem-act pairs (and not over problem pairs alone, as in the original model). We propose a model in which preferences are context-dependent. For each conceivable history of outcomes (to be thought of as the "context" of decision) there is a preference order over acts. If these context-dependent preference relations satisfy our consistency-across-contexts axioms, there is an essentially unique similarity function that represents these preferences via the (generalized) CBDT functional.

Suggested Citation

  • Itzhak Gilboa & David Schmeidler, 1996. "Act similarity in case-based decision theory (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 9(1), pages 47-62.
    • Handle: RePEc:spr:joecth:v:9:y:1996:i:1:p:47-62
    Note: Received: May 9, 1995;revised version October 4, 1995
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    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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