A Theory of Procedural Decision

Abstract

Procedural behavior is an important part of decision making under risk. Kahneman and Tversky (1979) acknowledge this in their outline of Prospect Theory by incorporating a preliminary editing phase. This paper take this process to develop a model where procedures are central to the decision-making process, wherein complex objects are iteratively simplified until they can be directly evaluated. We impose two restrictions on the space of possible procedure: that procedures are actions take upon subsets of lotteries and that these actions serve to simplify the lottery. From this arises a natural form of procedures, similar to those analyzed by Hu (2025). We provide several additional characterization of various models of non-expected utility under this framework.