How does the decision-making process under risk differ from decisions made under certainty?

Decisions made under risk involve unknown outcomes because the probabilities of various scenarios can be estimated but are not guaranteed. In contrast, decisions made under certainty imply that the outcomes are known and predictable. When operating under risk, a decision-maker must consider various possible outcomes and their associated probabilities, which adds complexity and uncertainty to the decision-making process. This ability to quantify potential outcomes allows for risk assessment and the application of decision-making frameworks that accommodate for varying levels of risk. In scenarios with certainty, the outcome of each decision is straightforward and predictable, eliminating the need to weigh possible risks. Therefore, the distinction lies in the nature of the outcomes: known outcomes provide clear decision paths, while unknown outcomes under risk necessitate analysis and estimation.