Related papers: A Theory of Choice Bracketing under Risk
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…
Two prominent objectives in social choice are utilitarian - maximizing the sum of agents' utilities, and leximin - maximizing the smallest agent's utility, then the second-smallest, etc. Utilitarianism is typically computationally easier to…
We propose a hedging approach for general contingent claims when liquidity is a concern and trading is subject to transaction cost. Multiple assets with different liquidity levels are available for hedging. Our risk criterion targets a…
We study causal inference under case-control and case-population sampling. Specifically, we focus on the binary-outcome and binary-treatment case, where the parameters of interest are causal relative and attributable risks defined via the…
The main objective of this paper is to develop a martingale-type solution to optimal consumption--investment choice problems ([Merton, 1969] and [Merton, 1971]) under time-varying incomplete preferences driven by externalities such as…
We provide an axiomatic foundation for the representation of num\'{e}raire-invariant preferences of economic agents acting in a financial market. In a static environment, the simple axioms turn out to be equivalent to the following choice…
We introduce an Attention Overload Model that captures the idea that alternatives compete for the decision maker's attention, and hence the attention that each alternative receives decreases as the choice problem becomes larger. Using this…
The prospects of Kahneman and Tversky, Mega Million and Powerball lotteries, St. Petersburg paradox, premature profits and growing losses criticized by Livermore are reviewed under an angle of view comparing mathematical expectations with…
This paper investigates a time-inconsistent portfolio selection problem in the incomplete mar ket model, integrating expected utility maximization with risk control. The objective functional balances the expected utility and variance on log…
We develop an approach to solve Barberis (2012)'s casino gambling model in which a gambler whose preferences are specified by the cumulative prospect theory (CPT) must decide when to stop gambling by a prescribed deadline. We assume that…
We model stochastic choices with categorization. The agent preliminarly groups alternatives in homogenous disjoint classes, then randomly chooses one class and randomly picks an item within the selected class. We give a formal definition of…
This paper studies a sequential decision problem where payoff distributions are known and where the riskiness of payoffs matters. Equivalently, it studies sequential choice from a repeated set of independent lotteries. The decision-maker is…
We propose a general theorem providing upper bounds for the risk of an empirical risk minimizer (ERM).We essentially focus on the binary classification framework. We extend Tsybakov's analysis of the risk of an ERM under margin type…
We consider a game-theoretic model where individuals compete over a shared failure-prone system or resource. We investigate the effectiveness of a taxation mechanism in controlling the utilization of the resource at the Nash equilibrium…
Selecting the combination of security controls that will most effectively protect a system's assets is a difficult task. If the wrong controls are selected, the system may be left vulnerable to cyber-attacks that can impact the…
Optimization is offered as an objective approach to resolving complex, real-world decisions involving uncertainty and conflicting interests. It drives business strategies as well as public policies and, increasingly, lies at the heart of…
We study a discrete-time consumption-based capital asset pricing model under expectations-based reference-dependent preferences. More precisely, we consider an endowment economy populated by a representative agent who derives utility from…
Many high-stakes AI deployments proceed only if every stakeholder deems the system acceptable relative to their own minimum standard. With randomization over a finite menu of options, this becomes a feasibility question: does there exist a…
We derive the most probable distribution of resources for a simple society. We find that a probabilistic analysis forbids both too much and too less equity, and selects instead a minimally ordered state. We give the detailed calculations…
We consider the problem of rationalizing choice data by a preference satisfying an arbitrary collection of invariance axioms. Examples of such axioms include quasilinearity, homotheticity, independence-type axioms for mixture spaces,…