Related papers: Risk Preferences in Time Lotteries
Gambles are random variables that model possible changes in monetary wealth. Classic decision theory transforms money into utility through a utility function and defines the value of a gamble as the expectation value of utility changes.…
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…
This paper studies decision problems where the decision maker's choice of action affects the probability distribution of a payoff relevant random variable. We establish sufficient conditions for the existence of an expected utility…
I provide necessary and sufficient conditions for an agent's preferences to be represented by a unique ergodic transformation. Put differently, if an agent seeks to maximize the time average growth of their wealth, what axioms must their…
Protecting against cyber-threats is vital for every organization and can be done by investing in cybersecurity controls and purchasing cyber insurance. However, these are interlinked since insurance premiums could be reduced by investing…
We study the classic divide-and-choose method for equitably allocating divisible goods between two players who are rational, self-interested Bayesian agents. The players have additive values for the goods. The prior distributions on those…
Algorithmic predictions are increasingly informing societal resource allocations by identifying individuals for targeting. Policymakers often build these systems with the assumption that by gathering more observations on individuals, they…
Most people are risk-averse (risk-seeking) when they expect to gain (lose). Based on a generalization of ``expected utility theory'' which takes this into account, we introduce an automaton mimicking the dynamics of economic operations.…
We model the joint distribution of choice probabilities and decision times in binary choice tasks as the solution to a problem of optimal sequential sampling, where the agent is uncertain of the utility of each action and pays a constant…
We are living in an uncertain and dynamically changing world, where optimal decision-making under uncertainty is directly linked to the survival of species. However, evolutionary selection pressures that shape value-based decision-making…
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…
We consider a discrete-time version of the popular optimal dividend pay-out problem in risk theory. The novel aspect of our approach is that we allow for a risk averse insurer, i.e., instead of maximising the expected discounted dividends…
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…
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…
In the multiarmed bandit problem a gambler chooses an arm of a slot machine to pull considering a tradeoff between exploration and exploitation. We study the stochastic bandit problem where each arm has a reward distribution supported in a…
Reinforcement learning can greatly benefit from the use of options as a way of encoding recurring behaviours and to foster exploration. An important open problem is how can an agent autonomously learn useful options when solving particular…
Opportunities, such as access to education or family background, shape income inequality by influencing the chances of economic success. Unequal opportunities create uncertainty about whether success is merit- or luck-based. We examine how…
In the online (time-series) search problem, a player is presented with a sequence of prices which are revealed in an online manner. In the standard definition of the problem, for each revealed price, the player must decide irrevocably…
This paper investigates a novel behavioral feature of recursive preferences: aversion to risks that persist over time, or simply \textit{correlation aversion}. Greater persistence provides information about future consumption but reduces…
Large amounts of evidence suggest that trust levels in a country are an important determinant of its macroeconomic growth. In this paper, we investigate one channel through which trust might support economic performance: through the levels…