Final answer:
The statement provided is false. Decision making under risk actually involves known probabilities of outcomes, whereas decision making under uncertainty is when probability information is unavailable. In business, especially insurance, probabilities are crucial in estimating and managing risk.
Step-by-step explanation:
The statement 'decision making under risk is used when probability information about the states of nature is unavailable' is false. Decision making under risk involves situations where the decision maker has some knowledge of the probabilities of different outcomes or states of nature. When probability information is unavailable, this is referred to as decision making under uncertainty. When making decisions under risk, individuals or states consider the likelihood of various outcomes based on available probability information to make informed choices.
In scenarios involving imperfect information, such as in the realm of insurance, probabilities are used to estimate and manage risk. For instance, while an insurance company cannot predict with certainty who will encounter a specific adverse event, it utilizes probability to estimate risk and set premiums accordingly.
Similarly, when states need to make strategic decisions, they use available intelligence information to assess risks and probabilities, aiming for the greatest net benefit in their actions. However, if this information is faulty, their response may not yield the expected outcome.