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One purpose -- quite a few thinkers would say the main purpose -- of seeking knowledge about the world is to enhance our ability to make good decisions. An item of knowledge that can make no conceivable difference with regard to anything we…

This paper investigates the consumption and risk taking decision of an economic agent with partial irreversibility of consumption decision by formalizing the theory proposed by Duesenberry (1949). The optimal policies exhibit a type of the…

A fundamental task in science is to design experiments that yield valuable insights about the system under study. Mathematically, these insights can be represented as a utility or risk function that shapes the value of conducting each…

Estimating and controlling large risks has become one of the main concern of financial institutions. This requires the development of adequate statistical models and theoretical tools (which go beyond the traditionnal theories based on…

In the 1958 paper "Shall we count the living or the dead", Canadian physician and biostatistician Mindel C. Sheps proposed a novel approach to choice of effect measure, which resolves key theoretical shortcomings of relative risk models.…

The "free trial" followed by automatic renewal is a dominant business model in the digital economy. Standard models explain trials as a mechanism for consumers to learn their valuation for a product. We propose a complementary theory based…

This paper builds a rule for decisionmaking from the physical behavior of single neurons, the well established neural circuitry of mutual inhibition, and the evolutionary principle of natural selection. No axioms are used in the derivation…

How should we evaluate the effect of a policy on the likelihood of an undesirable event, such as conflict? The significance test has three limitations. First, relying on statistical significance misses the fact that uncertainty is a…

In natural phenomena, data distributions often deviate from normality. One can think of cataclysms as a self-explanatory example: events that occur almost never, and at the same time are many standard deviations away from the common…

We address the problem that classical risk measures may not detect the tail risk adequately. This can occur for instance due to averaging when calculating the Expected Shortfall. The current literature proposes the so-called adjusted…

The policy gradients of the expected return objective can react slowly to rare rewards. Yet, in some cases agents may wish to emphasize the low or high returns regardless of their probability. Borrowing from the economics and control…

We report on a series of experiments concerning the feasibility of example driven modelling. The main aim was to establish experimentally within an academic environment: the relationship between error and task complexity using a)…

We consider the Bachelier model with information delay where investment decisions can be based only on observations from $H>0$ time units before. Utility indifference prices are studied for vanilla options and we compute their non-trivial…

We model human decision-making behaviors in a risk-taking task using inverse reinforcement learning (IRL) for the purposes of understanding real human decision making under risk. To the best of our knowledge, this is the first work applying…

Many policies allocate harms or benefits that are uncertain in nature: they produce distributions over the population in which individuals have different probabilities of incurring harm or benefit. Comparing different policies thus involves…

We develop a model of wishful thinking that incorporates the costs and benefits of biased beliefs. We establish the connection between distorted beliefs and risk, revealing how wishful thinking can be understood in terms of risk measures.…

I propose a finite sample inference procedure that uses a likelihood function derived from the randomization process within an experiment to conduct inference on various quantities that capture heterogeneous intervention effects. One such…

Carroll and Kimball (1996) have shown that, in the class of utility functions that are strictly increasing, strictly concave, and have nonnegative third derivatives, hyperbolic absolute risk aversion (HARA) is sufficient for the concavity…

We study a common-pool resource game where the resource experiences failure with a probability that grows with the aggregate investment in the resource. To capture decision making under such uncertainty, we model each player's risk…

This note investigates the causes of the quality anomaly, which is one of the strongest and most scalable anomalies in equity markets. We explore two potential explanations. The "risk view", whereby investing in high quality firms is…