Related papers: Utility Function and Optimum Consumption in the mo…
The "standard" Merton formulation of optimal investment and consumption involves optimizing the integrated lifetime utility of consumption, suitably discounted, together with the discounted future bequest. In this formulation the utility of…
We study consumption dependence in the context of random utility and repeated choice. We show that, in the presence of consumption dependence, the random utility model is a misspecified model of repeated rational choice. This…
This paper extends the classical consumption and portfolio rules model in continuous time (Merton 1969, 1971) to the framework of decision-makers with time-inconsistent preferences. The model is solved for different utility functions for…
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…
We study a dynamic random utility model that allows for consumption dependence. We axiomatically analyze this model and find insights that allow us to distinguish between behavior that arises due to consumption dependence and behavior that…
We consider a model of optimal investment and consumption with both habit formation and partial observations in incomplete It\^{o} processes market. The investor chooses his consumption under the addictive habits constraint while only…
This paper studies the continuous time utility maximization problem on consumption with addictive habit formation in incomplete semimartingale markets. Introducing the set of auxiliary state processes and the modified dual space, we embed…
We study a dynamic generalization of stochastic rationality in consumer behavior, the Dynamic Random Utility Model (DRUM). Under DRUM, a consumer draws a utility function from a stochastic utility process and maximizes this utility subject…
Understanding the energy consumption patterns of different types of consumers is essential in any planning of energy distribution. However, obtaining consumption information for single individuals is often either not possible or too…
Nowadays, attitudes towards electricity customers have been changed, so that they are no longer considered static players. The customers behavior identification is vital for establishing modern power systems. This paper utilizes the…
We study an optimal investment and consumption problem over a finite-time horizon, in which an individual invests in a risk-free asset and a risky asset, and evaluate utility using a general utility function that exhibits loss aversion with…
A dynamic model of collective consumption and saving decisions made by a finite number of agents with constant but different discount rates is developed. Collective utility is a weighted sum of individual utilities with time-varying utility…
When it comes to structural estimation of risk preferences from data on choices, random utility models have long been one of the standard research tools in economics. A recent literature has challenged these models, pointing out some…
We consider a robust consumption-investment problem under CRRA and CARA utilities. The time-varying confidence sets are specified by $\Theta$, a correspondence from $[0,T]$ to the space of L\'{e}vy triplets, and describe priori information…
We propose martingale consumption as a natural, desirable consumption pattern for any given (proportional) investment strategy. The idea is to always adjust current consumption so as to achieve level expected future consumption under the…
We provide a detailed characterization of the optimal consumption stream for the additive habit-forming utility maximization problem, in a framework of general discrete-time incomplete markets and random endowments. This characterization…
The sum-utility maximization problem is known to be important in the energy systems literature. The conventional assumption to address this problem is that the utility is concave. But for some key applications, such an assumption is not…
Historically, rational choice theory has focused on the utility maximization principle to describe how individuals make choices. In reality, there is a computational cost related to exploring the universe of available choices and it is…
We pursue an inverse approach to utility theory and consumption & investment problems. Instead of specifying an agent's utility function and deriving her actions, we assume we observe her actions (i.e. her consumption and investment…
In this paper we consider the problem of optimizing lifetime consumption under a habit formation model. Our work differs from previous results, because we incorporate mortality and pension income. Lifetime utility of consumption makes the…