The difference in decision making under uncertainty and decision making under certainty is that under uncertainty, we think we know the probabilities of the states of nature, while under certainty we know exactly the probabilities of the states of nature.

Question

Quizplus · Accepted Answer

The statement is incorrect. Under certainty, there is no uncertainty about the probabilities of the states of nature, they are known with 100% certainty. Therefore, the statement should be revised to say that under certainty, there is no need to make a decision since the outcome is already known, while under uncertainty we have to make a decision based on our estimated probabilities.

The Difference in Decision Making Under Uncertainty and Decision Making