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Unformatted text preview: herent in all decision-making (Bailey et al., in press, Hammond et al., 1999; Harrison, 1995; Goodwin and Wright, 1991; Morgan and Henrion, 1990) and hence receive considerable attention in the academic investment decision-making literature (for example, Atrill, 2000; Buckley, 2000; Murtha, 1997; Borsch and Mossin; 1968). This prominence is well deserved. Ubiquitous in realistic settings, risk and uncertainty constitute a major obstacle to effective capital investment decision-making (Simpson et al., 2000 and 1999; Lamb et al., 1999; Ball and Savage, 1999; Watson; 1998; Rose, 11 1987; Murtha, 1997; Newendorp, 1996; Oransanu and Connolly, 1993; McCaskey, 1986; Brunsson, 1985; Corbin, 1980; Thompson, 1967). 1. AUTHORS Anderson et al. (1981) TERM Uncertainty CONCEPTUALISATION A situation in which one has no knowledge about which of several states of nature has occurred or will occur 2. Anderson et al. (1981) Uncertainty A situation in which one knows only the probability of which several possible states of nature has occurred or will occur 3. Anderson et al. (1981) Risk Same as (1) 4. Anderson et al. (1981) Risk Same as (2) 5. Humphreys and Berkley (1985) Uncertainty The inability to assert with certainty one or more of the following: (a) act-event sequences; (b) event-event sequences; (c) value of consequences; (d) appropriate decision process; (e) future preferences and actions; (f) one’s ability to affect future events 6. Lathrop and Watson (1982) Risk 7. Lathrop and Watson (1982) Uncertainty Potential for deleterious consequences Lack of information available concerning what the impact of an event might be 8. MacCrimmon and Wehrung Uncertainty (1986) 9. Harrison (1995) Exposure to the chance of loss in a choice situation A common state or condition in decision-making Risk characterised by the possession of incomplete information regarding a probabilistic outcome. An uncommon state of nature characterised by the 10. Harrison (1995) Uncertainty absence of any information related to a desired outcome. The possibility of an undesirable result 11. Spradlin (1997) Risk A situation which refers to a state where the 12. Holmes (1998) Risk decision-maker has sufficient information to determine the probability of each outcome occurring. A situation where the decision-maker can identify 13. Holmes (1998) Uncertainty each possible outcome, but does not have the information necessary to determine the probabilities of each of the possibilities. Table 2.1: Conceptualisations of risk and uncertainty (source: adapted from Lipshitz and Strauss, 1997) 12 However, despite this prominence, there is much confusion in the academic investment decision-making literature over the definitions of risk and uncertainty. Table 2.1 presents a sample of the definitions of risk and uncertainty given by some of the contributors to the capital investment decision-making literature. The table clearly illustrates conceptual proliferation in the academic investment decision-making literature. This has led Argote (1982 p420) to assert: “…there are almost as many defi...
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