Related papers: The Relationship between Consumer Theories with an…
We study the problem of choosing optimal policy rules in uncertain environments using models that may be incomplete and/or partially identified. We consider a policymaker who wishes to choose a policy to maximize a particular counterfactual…
In this paper, we show that if every consumer in an economy has a quasi-linear utility function, then the normalized equilibrium price is unique, and is locally stable with respect to the t\^atonnement process. Our study can be seen as that…
People rationalize their past choices, even those that were mistakes in hindsight. We propose a formal theory of this behavior. The theory predicts that sunk costs affect later choices. Its model primitives are identified by choice behavior…
This paper studies an optimal consumption problem for a loss-averse agent with reference to past consumption maximum. To account for loss aversion on relative consumption, an S-shaped utility is adopted that measures the difference between…
We consider a financial market where stocks are available for dynamic trading, and European and American options are available for static trading (semi-static trading strategies). We assume that the American options are infinitely…
We study an optimal investment and consumption problem over a finite-time horizon, in which an individual invests in a risk-free asset and a risky asset, and evaluate utility using a general utility function that exhibits loss aversion with…
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…
This paper analyzes repeated version of the bilateral trade model where the independent payoff relevant private information of the buyer and the seller is correlated across time. Using this setup it makes the following five contributions.…
We analyze characteristics' joint predictive information through the lens of out-of-sample power utility functions. Linking weights to characteristics to form optimal portfolios suffers from estimation error which we mitigate by maximizing…
We consider an investor who wants to select her/his optimal consumption, investment and insurance policies. Motivated by new insurance products, we allow not only the financial marke but also the insurable loss to depend on the regime of…
In an electric power system, demand fluctuations may result in significant ancillary cost to suppliers. Furthermore, in the near future, deep penetration of volatile renewable electricity generation is expected to exacerbate the variability…
This paper studies the utility maximization problem of an agent with non-trivial endowment, and whose preferences are modeled by the maximal subsolution of a BSDE. We prove existence of an optimal trading strategy and relate our existence…
We consider the problem of designing auctions which maximize consumer surplus (i.e., the social welfare minus the payments charged to the buyers). In the consumer surplus maximization problem, a seller with a set of goods faces a set of…
We study group decision making with changing preferences as a Markov Decision Process. We are motivated by the increasing prevalence of automated decision-making systems when making choices for groups of people over time. Our main…
Positive feedback trading, which buys when prices rise and sells when prices fall, has long been criticized for being destabilizing as it moves prices away from the fundamentals. Motivated by the relationship between positive feedback…
This paper establishes the existence of equilibrium in an economy with production and a continuum of consumers, each of whose incomplete and price-dependent preferences are defined on commodities they may consider deleterious, bads which…
We study preferences estimated from finite choice experiments and provide sufficient conditions for convergence to a unique underlying "true" preference. Our conditions are weak, and therefore valid in a wide range of economic environments.…
We consider a risk-sensitive optimization of consumption-utility on infinite time horizon where the one-period investment gain depends on an underlying economic state whose evolution over time is assumed to be described by a discrete-time,…
This paper studies the utility maximization on the terminal wealth with random endowments and proportional transaction costs. To deal with unbounded random payoffs from some illiquid claims, we propose to work with the acceptable portfolios…
We price a contingent claim liability using the utility indifference argument. We consider an agent with exponential utility, who invests in a stock and a money market account with the goal of maximizing the utility of his investment at the…