Related papers: New developments in revealed preference theory: de…
Recovering and distinguishing between the strict-preference, indifference and/or indecisiveness parts of a decision maker's preferences is a challenging task but also important for testing theory and conducting welfare analysis. This paper…
Can stated preferences inform counterfactual analyses of actual choice? This research proposes a novel approach to researchers who have access to both stated choices in hypothetical scenarios and actual choices, matched or unmatched. The…
We demonstrate a limitation of discounted expected utility, a standard approach for representing the preference to risk when future cost is discounted. Specifically, we provide an example of the preference of a decision maker that appears…
The uncertainty quantification and risk modeling are hot topics in the operation and planning of energy systems. The system operators and planners are decision-makers that need to handle the uncertainty of input data of their models. As an…
In a consideration set model, an individual maximizes utility among the considered alternatives. I relate a consideration set additive random utility model to classic discrete choice and the extended additive random utility model, in which…
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…
We study the problem of maximising terminal utility for an agent facing model uncertainty, in a frictionless discrete-time market with one safe asset and finitely many risky assets. We show that an optimal investment strategy exists if the…
The most commonly accepted model for investors' preferences is expected utility theory. More recently, other theories have emerged and pose new challenges to mathematics. The present paper treats preferences of cumulative prospect theory…
This paper studies how violations of structural assumptions like expected utility and exponential discounting can be connected to basic rationality violations, even though these assumptions are typically regarded as independent building…
Can stated preferences help in counterfactual analyses of actual choice? This research proposes a novel approach to researchers who have access to both stated choices in hypothetical scenarios and actual choices. The key idea is to use…
We propose a multivariate extension of Yaari's dual theory of choice under risk. We show that a decision maker with a preference relation on multidimensional prospects that preserves first order stochastic dominance and satisfies…
This paper discusses capabilities that are essential to models applied in policy analysis settings and the limitations of direct applications of off-the-shelf machine learning methodologies to such settings. Traditional econometric…
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…
Addressing the question of how to achieve optimal decision-making under risk and uncertainty is crucial for enhancing the capabilities of artificial agents that collaborate with or support humans. In this work, we address this question in…
We study the testable implications of models of dynamically inconsistent choices when planned choices are unobservable, and thus only "on path" data is available. First, we discuss the approach in Blow, Browning and Crawford (2021), who…
We show that under plausible levels of background risk, no theory of choice under risk -- such as expected utility theory, prospect theory, or rank dependent utility -- can simultaneously satisfy the following three economic postulates: (i)…
Models allowing for random heterogeneity, such as mixed logit and latent class, are generally observed to obtain superior model fit and yield detailed insights into unobserved preference heterogeneity. Using theoretical arguments and two…
It is well known that ex ante social preferences and expected utility are not always compatible. In this note, we introduce a novel framework that naturally separates social preferences from selfish preferences to answer the following…
In robust optimization one seeks to make a decision under uncertainty, where the goal is to find the solution with the best worst-case performance. The set of possible realizations of the uncertain data is described by a so-called…
This paper is devoted to revealed preference theory and its applications to testing economic data for consistency with utility maximization hypothesis, construction of index numbers, and forecasting. The quantitative measures of…