Related papers: Num\'{e}raire-invariant preferences in financial m…
This paper devises a way to apply the Bank and El Karoui Representation Theorem to find the investment boundary of a rich stochastic, continuous time capacity expansion problem with irreversible investment on the finite time interval $[0,…
We explore the influence of framing on decision-making, where some products are framed (e.g., displayed, recommended, endorsed, or labeled). We introduce a novel choice function that captures observed variations in framed alternatives.…
In the large financial market, which is described by a model with countably many traded assets, we formulate the problem of the expected utility maximization. Assuming that the preferences of an economic agent are modeled with a stochastic…
How do decisions change with the economic environment and with time? This paper studies general nonstationary stopping problems and provides the methodological tools to answer these questions. First, we identify conditions that ensure a…
We consider a non-stationary variant of a sequential stochastic optimization problem, in which the underlying cost functions may change along the horizon. We propose a measure, termed variation budget, that controls the extent of said…
Most people are risk-averse (risk-seeking) when they expect to gain (lose). Based on a generalization of ``expected utility theory'' which takes this into account, we introduce an automaton mimicking the dynamics of economic operations.…
The value of an asset in a financial market is given in terms of another asset known as numeraire. The dynamics of the value is non-stationary and hence, to quantify the relationships between different assets, one requires convenient…
We study preferences estimated from finite choice experiments and provide sufficient conditions for convergence to a unique underlying "true" preference. Our conditions are weak, and therefore valid in a wide range of economic environments.…
The state of economic theory and accumulated facts from the different branches of the economic science require to analyze the concept of the description of economy systems. The economic reality generates the problems the solution of that is…
This paper studies a loss-averse version of the multiplicative habit formation preference and the corresponding optimal investment and consumption strategies over an infinite horizon. The agent's consumption preference is depicted by a…
The Stable Roommates problem involves matching a set of agents into pairs based on the agents' strict ordinal preference lists. The matching must be stable, meaning that no two agents strictly prefer each other to their assigned partners. A…
We consider a model where an agent has a repeated decision to make and wishes to maximize their total payoff. Payoffs are influenced by an action taken by the agent, but also an unknown state of the world that evolves over time. Before…
We study a class of heterogeneous agent-based models which are based on a basic set of principles, and the most fundamental operations of an economic system: trade and product transformations. A basic guiding principle is scale invariance,…
Bertrand et al. introduced a model of parameterised systems, where each agent is represented by a finite state system, and studied the following control problem: for any number of agents, does there exist a controller able to bring all…
Modeling the preferences of agents over a set of alternatives is a principal concern in many areas. The dominant approach has been to find a single reward/utility function with the property that alternatives yielding higher rewards are…
Although behavioral economics has demonstrated that there are many situations where rational choice is a poor empirical model, it has so far failed to provide quantitative models of economic problems such as price formation. We make a step…
This paper develops some mathematical models arising in behavioral sciences, particularly in psychology, which are formalized via general preferences with variable ordering structures. Our considerations are based on the recent variational…
This paper studies a type of consumption preference where some adjustment costs are incured whenever the past spending maximum and the past spending minimum records are updated. This preference can capture the adverse effects of the…
We investigate how the choice of decision makers can be varied under the presence of risk and uncertainty. Our analysis is based on the approach we have previously applied to individual decision makers, which we now generalize to the case…
This paper proposes two approaches that quantify the exact relationship among the viability, the absence of arbitrage, and/or the existence of the num\'eraire portfolio under minimal assumptions and for general continuous-time market…