Related papers: Absolute and Relative Ambiguity Attitudes
There is substantial variability in the expectations that communication partners bring into interactions, creating the potential for misunderstandings. To directly probe these gaps and our ability to overcome them, we propose a…
We provide here a general mathematical framework to model attitudes towards ambiguity which uses the formalism of quantum theory as a ``purely mathematical formalism, detached from any physical interpretation''. We show that the…
We study continuous-time portfolio choice with nonlinear payoffs under smooth ambiguity and Bayesian learning. We develop a general framework for dynamic, non-concave asset allocation that accommodates nonlinear payoffs, broad utility…
Decision under ambiguity (uncertainty with unknown probabilities) has been attracting attention in behavioral and neuroeconomics. However, recent neuroimaging studies have mainly focused on gain domains while little attention has been paid…
In the presence of ambiguity on the driving force of market randomness, we consider the dynamic portfolio choice without any predetermined investment horizon. The investment criteria is formulated as a robust forward performance process,…
When aggregating Subjective Expected Utility preferences, the Pareto principle leads to an impossibility result unless the individuals have a common belief. This paper examines the source of this impossibility in more detail by considering…
This thesis develops a new divergence that generalizes relative entropy and can be used to compare probability measures without a requirement of absolute continuity. We establish properties of the divergence, and in particular derive and…
Ambiguity is an intrinsic feature of natural language. Managing ambiguity is a key part of human language understanding, allowing us to anticipate misunderstanding as communicators and revise our interpretations as listeners. As language…
Predictive models are being increasingly used to support consequential decision making at the individual level in contexts such as pretrial bail and loan approval. As a result, there is increasing social and legal pressure to provide…
We derive a closed-form expression capturing the degree of Relative Risk Aversion (RRA) of investors for non-"fair" lotteries. We argue that our formula is superior to earlier methods that have been proposed, as it is a function of only…
We provide a new foundation of risk aversion by showing that this attitude is fully captured by the propensity to seize insurance opportunities. Our foundation, which applies to all probabilistically sophisticated preferences, well accords…
We introduce and study the problem of detecting whether an agent is updating their prior beliefs given new evidence in an optimal way that is Bayesian, or whether they are biased towards their own prior. In our model, biased agents form…
There is growing interest in the role of sentiment in economic decision-making. However, most research on the subject has focused on positive and negative valence. Conviction Narrative Theory (CNT) places Approach and Avoidance sentiment…
We study an outcome of a vote in a population of voters exposed to an externally applied bias in favour of one of two potential candidates. The population consists of ordinary individuals, that are in majority and tend to align their…
We present asymptotic results for the regression-adjusted version of approximate Bayesian computation introduced by Beaumont(2002). We show that for an appropriate choice of the bandwidth, regression adjustment will lead to a posterior…
An agent choosing between various actions tends to take the one with the lowest cost. But this choice is arguably too rigid (not adaptive) to be useful in complex situations, e.g., where exploration-exploitation trade-off is relevant in…
Individuals use models to guide decisions, but many models are wrong. This paper studies which misspecified models are likely to persist when individuals also entertain alternative models. Consider an agent who uses her model to learn the…
Meta-training agents with memory has been shown to culminate in Bayes-optimal agents, which casts Bayes-optimality as the implicit solution to a numerical optimization problem rather than an explicit modeling assumption. Bayes-optimal…
In choice under risk, there is a standard notion of 'less risk-averse than', due to Yaari (1969). In the theory of comparative statics, the single-crossing property is satisfied by all weighted averages of a family of single-crossing…
In response to an object presentation, supervised learning schemes generally respond with a parsimonious label. Upon a similar presentation we humans respond again with a label, but are flooded, in addition, by a myriad of associations. A…