Related papers: Realization Utility with Reference-Dependent Prefe…
The aim of this work consists in the study of the optimal investment strategy for a behavioural investor, whose preference towards risk is described by both a probability distortion and an S-shaped utility function. Within a continuous-time…
Decision theory does not traditionally include uncertainty over utility functions. We argue that the a person's utility value for a given outcome can be treated as we treat other domain attributes: as a random variable with a density…
Adaptive behavior in volatile environments requires agents to switch among value-control regimes across latent contexts, but maintaining separate preferences, policy biases, and action-confidence parameters for every situation is…
In this paper we derive the exact solution of the multi-period portfolio choice problem for an exponential utility function under return predictability. It is assumed that the asset returns depend on predictable variables and that the joint…
We establish explicit socially optimal rules for an irreversible investment deci- sion with time-to-build and uncertainty. Assuming a price sensitive demand function with a random intercept, we provide comparative statics and economic…
Bayesian decision theory outlines a rigorous framework for making optimal decisions based on maximizing expected utility over a model posterior. However, practitioners often do not have access to the full posterior and resort to approximate…
In the causal adjustment setting, variable selection techniques based on one of either the outcome or treatment allocation model can result in the omission of confounders, which leads to bias, or the inclusion of spurious variables, which…
The discrepancy between realized volatility and the market's view of volatility has been known to predict individual equity options at the monthly horizon. It is not clear how this predictability depends on a forecast's ability to predict…
We consider a game-theoretic model where individuals compete over a shared failure-prone system or resource. We investigate the effectiveness of a taxation mechanism in controlling the utilization of the resource at the Nash equilibrium…
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…
Mutually exclusive decisions have been studied for decades. Many well-known decision theories have been defined to help people either to make rational decisions or to interpret people's behaviors, such as expected utility theory, regret…
This paper formulates an utility indifference pricing model for investors trading in a discrete time financial market under non-dominated model uncertainty. The investors preferences are described by strictly increasing concave random…
A variety of statistical graphical models have been defined to represent the conditional independences underlying a random vector of interest. Similarly, many different graphs embedding various types of preferential independences, as for…
The Random Utility Maximization model is by far the most adopted framework to estimate consumer choice behavior. However, behavioral economics has provided strong empirical evidence of irrational choice behavior, such as halo effects, that…
Nontransitive choices have long been an area of curiosity within economics. However, determining whether nontransitive choices represent an individual's preference is a difficult task since choice data is inherently stochastic. This paper…
Random utility theory models an agent's preferences on alternatives by drawing a real-valued score on each alternative (typically independently) from a parameterized distribution, and then ranking the alternatives according to scores. A…
By embedding uncertainty into time, we obtain a conjoint axiomatic characterization of both Exponential Discounting and Subjective Expected Utility that accommodates arbitrary state and outcome spaces. In doing so, we provide a novel and…
In Regression Discontinuity (RD) design, self-selection leads to different distributions of covariates on two sides of the policy intervention, which essentially violates the continuity of potential outcome assumption. The standard RD…
An analyst observes an agent take a sequence of actions. The analyst does not have access to the agent's information and ponders whether the observed actions could be justified through a rational Bayesian model with a known utility…
We consider the robust exponential utility maximization problem in discrete time: An investor maximizes the worst case expected exponential utility with respect to a family of nondominated probabilistic models of her endowment by…