Abstract

Rational decision theory requires that the decision maker attach von Neumann–Morgenstern utilities to possible outcomes. Each outcome represents the combination of the state of the world and a decision taken. In a broad range of decision problems, however, the decision maker is unable to identify important outcomes, hence potential significant outcomes remain unknown. Ignorance represents a situation in which some potential outcomes cannot be identified. Ignorance has received surprisingly scant attention in the behavioral economics literature. ¹ This chapter examines the concept of ignorance and identifies the behavioral propensities that arise when it is present—some well known and others specific to decision situations that involve ignorance. It also introduces a new methodological approach to behavioral decision, drawing on the choices of characters in great literature as qualitative evidence of human behavior. Portions of this chapter draw on our recent studies (Roy and Zeckhauser, 2015).