Related papers: A Theory of Choice Bracketing under Risk
People often deviate from expected utility theory when making risky and intertemporal choices. While the effects of probabilistic risk and time delay have been extensively studied in isolation, their interplay and underlying theoretical…
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 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)…
Diversification represents the idea of choosing variety over uniformity. Within the theory of choice, desirability of diversification is axiomatized as preference for a convex combination of choices that are equivalently ranked. This…
The expected utility hypothesis is a popular concept in economics that is useful for making decisions when the payoff is uncertain. In this paper, we investigate the implications of a fluctuation theorem in the theory of expected utility.…
A family of models of individual discrete choice are constructed by means of statistical averaging of choices made by a subject in a reinforcement learning process, where the subject has short, k-term memory span. The choice probabilities…
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…
Although many investigators affirm a desire to build reasoning systems that behave consistently with the axiomatic basis defined by probability theory and utility theory, limited resources for engineering and computation can make a complete…
The expectation is an example of a descriptive statistic that is monotone with respect to stochastic dominance, and additive for sums of independent random variables. We provide a complete characterization of such statistics, and explore a…
Subjective expected utility theory assumes that decision-makers possess unlimited computational resources to reason about their choices; however, virtually all decisions in everyday life are made under resource constraints - i.e.…
Possibilistic risk theory starts from the hypothesis that risk is modelled by fuzzy numbers. In particular, in a possibilistic portfolio choice problem, the return of a risky asset will be a fuzzy number. The expected utility operators have…
Combining short-term experimental data with observational data enables credible long-term policy evaluation. The literature offers two key but non-nested assumptions, namely the latent unconfoundedness (LU; Athey et al., 2020) and…
Many important economic outcomes result from the combined effects of several choices, so the best option is not determined from each choice in isolation, but depends on how each choice alters total outcomes. We formally show that narrow…
We propose a continuous-time model of trading with heterogeneous beliefs. Risk-neutral agents face quadratic costs-of-carry on positions and thus their marginal valuations decrease with the size of their position, as it would be the case…
Mutually exclusive decisions have been studied for decades. Many well-known decision theories have been defined to help people either to make rational decisions or to interpret people's behaviors, such as expected utility theory, regret…
Using results from neurobiology on perceptual decision making and value-based decision making, the problem of decision making between lotteries is reformulated in an abstract space where uncertain prospects are mapped to corresponding…
This paper investigates the use of risk measures and theories of choice for modeling risk-averse route choice and traffic network equilibrium with random travel times. We interpret the postulates of these theories in the context of routing,…
There have been two major lines of research aimed at capturing resource-bounded players in game theory. The first, initiated by Rubinstein, charges an agent for doing costly computation; the second, initiated by Neyman, does not charge for…
Experiments suggest that people fail to take into account interdependencies between their choices -- they do not broadly bracket. Researchers often instead assume that people narrowly bracket, but existing designs do not test it. We design…
Complexity of the problem of choosing among uncertain acts is a salient feature of many of the environments in which departures from expected utility theory are observed. I propose and axiomatize a model of choice under uncertainty in which…