Related papers: Remarks on Utility in Repeated Bets
This work considers reasons for and implications of discarding the assumption of transitivity, which (transitivity) is the fundamental postulate in the utility theory of Von Neumann and Morgenstern, the adiabatic accessibility principle of…
We consider a continuous-time market with proportional transaction costs. Under appropriate assumptions we prove the existence of optimal strategies for investors who maximize their worst-case utility over a class of possible models. We…
In this paper, we establish a mathematical duality between utility transforms and probability distortions. These transforms play a central role in decision under risk by forming the foundation for the classic theories of expected utility,…
We study the problem of maximising terminal utility for an agent facing model uncertainty, in a frictionless discrete-time market with one safe asset and finitely many risky assets. We show that an optimal investment strategy exists if the…
This paper studies decision making for Walley's partially consonant belief functions (pcb). In a pcb, the set of foci are partitioned. Within each partition, the foci are nested. The pcb class includes probability functions and possibility…
Stability of the utility maximization problem with random endowment and indifference prices is studied for a sequence of financial markets in an incomplete Brownian setting. Our novelty lies in the nonequivalence of markets, in which the…
We obtain variants of the classical von Neumann-Morgenstern expected utility theorem, with and without the completeness axiom, in which the derived Bernoulli utility functions are Lipschitz. The prize space in these results is an arbitrary…
Participatory budgeting refers to the practice of allocating public resources by collecting and aggregating individual preferences. Most existing studies in this field often assume an additive utility function, where each individual holds a…
We obtain an elementary characterization of expected utility based on a representation of choice in terms of psychological gambles, which requires no assumption other than coherence between ex-ante and ex-post preferences. Weaker version of…
We consider the problem of utility maximization for small traders on incomplete financial markets. As opposed to most of the papers dealing with this subject, the investors' trading strategies we allow underly constraints described by…
In the theory of social choice the research is focused around the projection of individual preference orders to the social preference order. Also, the justification of the preference order formalism begins with the concept of utility i.e.…
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 utility-maximization problem in a general semimartingale financial model, subject to constraints on the number of shares held in each risky asset. These constraints are modeled by predictable convex-set-valued processes whose…
The von Neumann and Morgenstern theory postulates that rational choice under uncertainty is equivalent to maximization of expected utility (EU). This view is mathematically appealing and natural because of the affine structure of the space…
The problem of robust utility maximization in an incomplete market with volatility uncertainty is considered, in the sense that the volatility of the market is only assumed to lie between two given bounds. The set of all possible models…
Bayesian decision theory outlines a rigorous framework for making optimal decisions based on maximizing expected utility over a model posterior. However, practitioners often do not have access to the full posterior and resort to approximate…
In this paper we have devised an alternative methodological approach for quantifying utility in terms of expected information content of the decision-maker's choice set. We have proposed an extension to the concept of utility by…
A resolution of the St. Petersburg paradox is presented. In contrast to the standard resolution, utility is not required. Instead, the time-average performance of the lottery is computed. The final result can be phrased mathematically…
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…
We use the Minority Game as a testing frame for the problem of the emergence of diversity in socio-economic systems. For the MG with heterogeneous impacts, we show that the direct generalization of the usual agents' profit does not fit some…