Related papers: A Theory of Choice Bracketing under Risk
Most decision theories, including expected utility theory, rank dependent utility theory and cumulative prospect theory, assume that investors are only interested in the distribution of returns and not in the states of the economy in which…
Using theory and experiments, this paper shows that the difficulty of making tradeoffs offers a parsimonious explanation for a wide range of behavioral phenomena. We develop a model of imprecise comparisons applicable to multiattribute,…
We consider the problem of estimating assortment probabilities, which is common in operations management applications, including product bundling, advertising, etc. Existing approaches typically model each assortment as a category and apply…
We seek to understand when heterogeneity in user preferences yields improved outcomes in terms of overall cost. That this might be hoped for is based on the common belief that diversity is advantageous in many settings. We investigate this…
This paper formulates a model of utility for a continuous time framework that captures the decision-maker's concern with ambiguity about both volatility and drift. Corresponding extensions of some basic results in asset pricing theory are…
The trade-off between the cost of acquiring and processing data, and uncertainty due to a lack of data is fundamental in machine learning. A basic instance of this trade-off is the problem of deciding when to make noisy and costly…
Historically, rational choice theory has focused on the utility maximization principle to describe how individuals make choices. In reality, there is a computational cost related to exploring the universe of available choices and it is…
Risk aggregation is a popular method used to estimate the sum of a collection of financial assets or events, where each asset or event is modelled as a random variable. Applications, in the financial services industry, include insurance,…
This paper studies choice situations in which a decision maker can choose multiple alternatives. Given a menu of available options, the decision maker selects a subset of the menu with certain probabilities. We employ an axiomatic approach…
Decision-making AI agents are often faced with two important challenges: the depth of the planning horizon, and the branching factor due to having many choices. Hierarchical reinforcement learning methods aim to solve the first problem, by…
When people pursue rewards in stochastic environments, they often match their choice frequencies to the observed target frequencies, even when this policy is demonstrably sub-optimal. We used a ``hide and seek'' task to evaluate this…
McFadden and Richter (1991) and later McFadden (2005) show that the Axiom of Revealed Stochastic Preference characterizes rationalizability of choice probabilities through random utility models on finite universal choice spaces. This note…
The assortment problem in revenue management is the problem of deciding which subset of products to offer to consumers in order to maximise revenue. A simple and natural strategy is to select the best assortment out of all those that are…
Behavioral theories rest on parsimony: a small number of mechanisms organizing many decisions. We define a Maximum Rule Concentration Index that measures how parsimoniously a dataset of risky choices can be organized through a library of…
This paper investigates a robust optimal consumption, investment, and reinsurance problem for an insurer with Epstein-Zin recursive preferences operating under model uncertainty. The insurer's surplus follows the diffusion approximation of…
We explore the role that random arbitrage opportunities play in hedging financial derivatives. We extend the asymptotic pricing theory presented by Fedotov and Panayides [Stochastic arbitrage return and its implication for option pricing,…
Large-scale registries have collected vast amounts of data which has enabled investigators to efficiently conduct studies of observational data. Common practice is for investigators to use all data meeting the inclusion criteria of their…
Choice overload - in which larger choice sets are detrimental to a chooser's well-being - is potentially of great importance in the design of economic policy. Yet the current evidence on its prevalence is inconclusive. We argue that…
Recent work on the logical structure of non-locality has constructed scenarios where observations of multi-partite systems cannot be adequately described by compositions of non-signaling subsystems. In this paper we apply these frameworks…
This study employs gamified experiments to investigate and refine the Schelling Model of Segregation, a framework that demonstrates how individual preferences can lead to systemic segregation. Using a movement selection algorithm derived…