Related papers: Microfoundations of Discounting
Classical Decision Theory provides a normative framework for representing and reasoning about complex preferences. Straightforward application of this theory to automate decision making is difficult due to high elicitation cost. In response…
Consider an agent taking two successive decisions to maximize his expected utility under uncertainty. After his first decision, a signal is revealed that provides information about the state of nature. The observation of the signal allows…
We propose a novel system for action sequence planning based on a combination of affordance recognition and a neural forward model predicting the effects of affordance execution. By performing affordance recognition on predicted futures, we…
Standard methods in preference learning involve estimating the parameters of discrete choice models from data of selections (choices) made by individuals from a discrete set of alternatives (the choice set). While there are many models for…
In lending, where prices are specific to both customers and products, having a well-functioning personalized pricing policy in place is essential to effective business making. Typically, such a policy must be derived from observational…
We consider an individual or household endowed with an initial capital and an income, modeled as a linear function of time. Assuming that the discount rate evolves as an Ornstein-Uhlenbeck process, we target to find an unrestricted…
In mainstream neoclassical economics, utility maximization is the only engine of individual action, and the other or the social, if it is modeled for decisions deemed fundamental, it is done as a tacit externality parameter affecting an…
We study a \emph{financial} version of the classic online problem of scheduling weighted packets with deadlines. The main novelty is that, while previous works assume packets have \emph{fixed} weights throughout their lifetime, this work…
This survey reviews recent developments in revealed preference theory. It discusses the testable implications of theories of choice that are germane to specific economic environments. The focus is on expected utility in risky environments;…
We consider the problem of a firm seeking to use personalized pricing to sell an exogenously given stock of a product over a finite selling horizon to different consumer types. We assume that the type of an arriving consumer can be observed…
In this work we generalize standard Decision Theory by assuming that two outcomes can also be incomparable. Two motivating scenarios show how incomparability may be helpful to represent those situations where, due to lack of information,…
Many-to-many matching with contracts is studied in the framework of revealed preferences. All preferences are described by choice functions that satisfy natural conditions. Under a no-externality assumption individual preferences can be…
We study dynamic pricing where a seller repeatedly interacts with a strategic, non-myopic buyer who has a fixed private valuation and discounts future utility. Prior work focused exclusively on posted-price mechanisms, which only extract…
People rationalize their past choices, even those that were mistakes in hindsight. We propose a formal theory of this behavior. The theory predicts that sunk costs affect later choices. Its model primitives are identified by choice behavior…
The paper [12] examines a concept of equilibrium policies instead of optimal controls in stochastic optimization to analyze a mean-variance portfolio selection problem. We follow the same approach in order to investigate the Merton…
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…
The large variety of digital payment choices available to consumers today has been a key driver of e-commerce transactions in the past decade. Unfortunately, this has also given rise to cybercriminals and fraudsters who are constantly…
An important but understudied question in economics is how people choose when facing uncertainty in the timing of events. Here we study preferences over time lotteries, in which the payment amount is certain but the payment time is…
Background: Confirmation bias is the tendency to acquire or evaluate new information in a way that is consistent with one's preexisting beliefs. It is omnipresent in psychology, economics, and even scientific practices. Prior theoretical…
Under non-exponential discounting, we develop a dynamic theory for stopping problems in continuous time. Our framework covers discount functions that induce decreasing impatience. Due to the inherent time inconsistency, we look for…