Related papers: The time interpretation of expected utility theory
The efficient use of available resources is a key factor in achieving success on both personal and organizational levels. One of the crucial resources in knowledge economy is time. The ability to force others to adapt to our schedule even…
We study the limit behaviour of upper and lower bounds on expected time averages in imprecise Markov chains; a generalised type of Markov chain where the local dynamics, traditionally characterised by transition probabilities, are now…
In a financial market model, we consider variations of the problem of minimizing the expected time to upcross a certain wealth level. For exponential Levy markets, we show the asymptotic optimality of the growth-optimal portfolio for the…
This article aims at reviewing recent empirical and theoretical developments usually grouped under the term Econophysics. Since its name was coined in 1995 by merging the words Economics and Physics, this new interdisciplinary field has…
In order to describe the properties of the observed distribution of wealth in a population, most economic models rely on the existence of an asymptotic equilibrium state. In addition, the process generating the equilibrium distribution is…
There has been much recent interest in two-sided markets and dynamics thereof. In a rather a general discrete-time feedback model, which we show conditions that assure that for each agent, there exists the limit of a long-run average…
A classical portfolio theory deals with finding the optimal proportion in which an agent invests a wealth in a risk-free asset and a probabilistic risky asset. Formulating and solving the problem depend on how the risk is represented and…
Most decision theories, including expected utility theory, rank dependent utility theory and cumulative prospect theory, assume that investors are only interested in the distribution of returns and not in the states of the economy in which…
Under mean-variance-utility framework, we propose a new portfolio selection model, which allows wealth and time both have influences on risk aversion in the process of investment. We solved the model under a game theoretic framework and…
Understanding the statistical dynamics of growth and inequality is a fundamental challenge to ecology and society. Recent analyses of wealth and income dynamics in contemporary societies show that economic inequality is very dynamic and…
We develop a formalism to study linearized perturbations around the equilibria of a pure exchange economy. With the use of mean field theory techniques, we derive equations for the flow of products in an economy driven by heterogeneous…
What is the emergent long-run equilibrium of a society where many interacting agents bet on the optimal energy to put in place in order to climb on the Bandwagon? In this paper we study the collective behavior of a large population of…
Simple agent based exchange models are a commonplace in the study of wealth distribution of artificial societies. Generally, each agent is characterized by its wealth and by a risk-aversion factor, and random exchanges between agents allow…
Welfare economics relies on access to agents' utility functions: we revisit classical questions in welfare economics, assuming access to data on agents' past choices instead of their utilities. Our main result considers the existence of…
Stochastic multiplicative dynamics characterize many complex natural phenomena such as selection and mutation in evolving populations, and the generation and distribution of wealth within social systems. Population heterogeneity in…
In this work we study the continuous time exponential utility maximization problem in the framework of an investor who is informed about the price changes with a delay. This leads to a non-Markovian stochastic control problem. In the case…
Voluntary insurance contracts constitute a puzzle because they increase the expectation value of one party's wealth, whereas both parties must sign for such contracts to exist. Classically, the puzzle is resolved by introducing non-linear…
The exploration-exploitation trade-off is central to the description of adaptive behaviour in fields ranging from machine learning, to biology, to economics. While many approaches have been taken, one approach to solving this trade-off has…
This paper discusses an alternative explanation for the empirical findings contradicting the positive relationship between risk (variance) and reward (expected return). We show that these contradicting results might be due to the false…
We study the Merton portfolio management problem within a complete market, non constant time discount rate and general utility framework. The non constant discount rate introduces time inconsistency which can be solved by introducing sub…