Subjective Probability and Ambiguity

This thesis studies major theories of decision making under risk and uncertainty. The rst part of the thesis showed that simple psycho-physical principles stand behind the leading behavioral models. In the second part tools are developed to measure parameters of those lead- ing theories, subjective probabilities and beliefs in the case of expected utility and its generalizations like prospect theory, and similarity weights in the case of case-based decision theory. The last part applies prospect theory to give a policy advice to a government on the way to support industry-oriented R&D and innovation.