Related papers: Risk Preferences in Time Lotteries
This paper studies relations among axioms on individuals' intertemporal choices under risk. The focus is on Risk Averse over Time Lotteries (RATL), meaning that a fixed prize is preferred to a lottery with the same monetary prize but a…
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;…
Ergodicity describes an equivalence between the expectation value and the time average of observables. Applied to human behaviour, ergodic theories of decision-making reveal how individuals should tolerate risk in different environments. To…
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…
Ergodicity economics is a new branch of economic theory that notes the conceptual difference between time averages and expectation values, which coincide only for ergodic observables. It postulates that individual agents maximise the time…
Users can now give back energies to the grid using distributed resources. Proper incentive mechanisms are required for such users, also known as prosumers, in order to maximize the sell-back amount while maintaining the retailer's profit.…
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…
When decision makers evaluate a sequence of rewards, they may pay more attention to larger rewards and, given attention is limited, less attention to smaller rewards. They may also become less attentive to each reward when attention is…
Lotteries are a prevalent form of gambling between a seller and buyers. Designing a lottery requires a model of how buyers make decisions when confronted with uncertain outcomes. Cumulative prospect theory (CPT) is a descriptive model that…
We implement nonparametric revealed-preference tests of subjective expected utility theory and its generalizations. We find that a majority of subjects' choices are consistent with the maximization of some utility function. They respond to…
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.…
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.…
This paper considers the portfolio management problem of optimal investment, consumption and life insurance. We are concerned with time inconsistency of optimal strategies. Natural assumptions, like different discount rates for consumption…
As large language models (LLMs) like GPT become increasingly prevalent, it is essential that we assess their capabilities beyond language processing. This paper examines the economic rationality of GPT by instructing it to make budgetary…
In economics and psychology, delay discounting is often used to characterize how individuals choose between a smaller immediate reward and a larger delayed reward. People with higher delay discounting rate (DDR) often choose smaller but…
We consider the robust exponential utility maximization problem in discrete time: An investor maximizes the worst case expected exponential utility with respect to a family of nondominated probabilistic models of her endowment by…
Aggregating risks from multiple sources can be complex and demanding, and decision makers usually adopt heuristics to simplify the evaluation process. This paper axiomatizes two closed related and yet different heuristics, narrow bracketing…
Motivated by the recently launched mobile data trading markets (e.g., China Mobile Hong Kong's 2nd exChange Market), in this paper we study the mobile data trading problem under the future data demand uncertainty. We introduce a…
Individuals are often faced with temptations that can lead them astray from long-term goals. We're interested in developing interventions that steer individuals toward making good initial decisions and then maintaining those decisions over…
We use a series of pre-registered, incentive-compatible online experiments to investigate how people evaluate and choose among different waiting time distributions. Our main findings are threefold. First, consistent with prior literature,…