Related papers: Measuring Belief and Risk Attitude
An agent choosing between various actions tends to take the one with the lowest cost. But this choice is arguably too rigid (not adaptive) to be useful in complex situations, e.g., where exploration-exploitation trade-off is relevant in…
The Probabilistic Serial mechanism is well-known for its desirable fairness and efficiency properties. It is one of the most prominent protocols for the random assignment problem. However, Probabilistic Serial is not incentive-compatible,…
I conduct Rabin's (2000) calibration exercise in the subjective expected utility realm. I show that the rejection of some risky bet by a risk-averse agent only implies the rejection of more extreme and less desirable bets and nothing more.
An agent acquires information dynamically until her belief about a binary state reaches an upper or lower threshold. She can choose any signal process subject to a constraint on the rate of entropy reduction. Strategies are ordered by "time…
We introduce two kinds of risk measures with respect to some reference probability measure, which both allow for a certain order structure and domination property. Analyzing their relation to each other leads to the question when a certain…
We provide sufficient conditions for semi-nonparametric point identification of a mixture model of decision making under risk, when agents make choices in multiple lines of insurance coverage (contexts) by purchasing a bundle. As a first…
This work considers a Bayesian signal processing problem where increasing the power of the probing signal may cause risks or undesired consequences. We employ a market based approach to solve energy management problems for signal detection…
We consider a setting where an agent's uncertainty is represented by a set of probability measures, rather than a single measure. Measure-bymeasure updating of such a set of measures upon acquiring new information is well-known to suffer…
I study robust comparative statics for risk-averse subjective expected utility (SEU) maximizers. Starting with a finite menu of actions totally ordered by sensitivity to risk, I identify the transformations of her menu that lead a…
I revisit the standard moral-hazard model, in which an agent's preference over contracts is rooted in costly effort choice. I characterise the behavioural content of the model in terms of empirically testable axioms, and show that the…
Potential Future Exposure (PFE) is a standard risk metric for managing business unit counterparty credit risk but there is debate on how it should be calculated. The debate has been whether to use one of many historical ("physical")…
Detection rules have traditionally been designed for rational agents that minimize the Bayes risk (average decision cost). With the advent of crowd-sensing systems, there is a need to redesign binary hypothesis testing rules for behavioral…
In this paper, we consider one aspect of the problem of applying decision theory to the design of agents that learn how to make decisions under uncertainty. This aspect concerns how an agent can estimate probabilities for the possible…
Agents interacting with an incompletely known world need to be able to reason about the effects of their actions, and to gain further information about that world they need to use sensors of some sort. Unfortunately, both the effects of…
The estimation of risk measures recently gained a lot of attention, partly because of the backtesting issues of expected shortfall related to elicitability. In this work we shed a new and fundamental light on optimal estimation procedures…
This paper develops a model of reference-dependent assessment of subjective beliefs in which loss-averse people optimally choose the expectation as the reference point to balance the current felicity from the optimistic anticipation and the…
We consider a setting where an agent's uncertainty is represented by a set of probability measures, rather than a single measure. Measure-by-measure updating of such a set of measures upon acquiring new information is well-known to suffer…
In many countries financial service providers have to elicit their customers risk preferences, when offering products and services. For instance, in the Netherlands pension funds will be legally obliged to factor in their clients risk…
This paper looks at predictability problems, i.e., wherein an agent must choose its strategy in order to optimize the predictions that an external observer could make. We address these problems while taking into account uncertainties on the…
We obtain an elementary characterization of expected utility based on a representation of choice in terms of psychological gambles, which requires no assumption other than coherence between ex-ante and ex-post preferences. Weaker version of…