Related papers: Non-Allais Paradox and Context-Dependent Risk Atti…
The principle that rational agents should maximize expected utility or choiceworthiness is intuitively plausible in many ordinary cases of decision-making under uncertainty. But it is less plausible in cases of extreme, low-probability risk…
The use of von Neumann -- Morgenstern utility is examined in the context of multiple choices between lotteries. Different conclusions are reached if the choices are simultaneous or sequential. It is demonstrated that utility cannot be…
Dependence on the parameter is continuous when perturbations of the parameter preserves strict preference for one alternative over another. We characterise this property via a utility function over alternatives that depends continuously on…
Choice functions constitute a simple, direct and very general mathematical framework for modelling choice under uncertainty. In particular, they are able to represent the set-valued choices that appear in imprecise-probabilistic decision…
Richard Cox [1] set the axiomatic foundations of probable inference and the algebra of propositions. He showed that consistency within these axioms requires certain rules for updating belief. In this paper we use the analogy between…
A classical portfolio theory deals with finding the optimal proportion in which an agent invests a wealth in a risk-free asset and a probabilistic risky asset. Formulating and solving the problem depend on how the risk is represented and…
We axiomatize the Choquet rank-dependent utility model within a Savage framework with an exogenous source of pure risk. This model is a decision model under ambiguity, serving as a conceptual generalization of the Choquet expected utility…
We develop a tractable model of realization utility that studies the role of reference-dependent S-shaped preferences in a dynamic investment setting with reinvestment. Our model generates both voluntarily realized gains and losses. It…
We study a discrete-time consumption-based capital asset pricing model under expectations-based reference-dependent preferences. More precisely, we consider an endowment economy populated by a representative agent who derives utility from…
The famous Saint Petersburg Paradox (St. Petersburg Paradox) shows that the theory of expected value does not capture the real-world economics of decision-making problems. Over the years, many economic theories were developed to resolve the…
Gilboa and Schmeidler's (1989) uncertainty aversion plays a central role in decision theory and economics, yet many inconsistent behaviors have been observed in experiments. Motivated by this, we study an axiom postulating a minimal degree…
Fluctuations can challenge the possibility of improving work extraction from quantum correlations. This uncertainty in the work extraction process can be addressed resorting to the expected utility hypothesis which can provide an optimal…
The expectation is an example of a descriptive statistic that is monotone with respect to stochastic dominance, and additive for sums of independent random variables. We provide a complete characterization of such statistics, and explore a…
Expected Utility: Algebraic Expected Utility In this paper, we provide two axiomatizations of algebraic expected utility, which is a particular generalized expected utility, in a von Neumann-Morgenstern setting, i.e. uncertainty…
This study proposes a tractable stochastic choice model to identify motivations for prosocial behavior, and to explore alternative motivations of deliberate randomization beyond ex-ante fairness concerns. To represent social preferences, we…
Addressing the question of how to achieve optimal decision-making under risk and uncertainty is crucial for enhancing the capabilities of artificial agents that collaborate with or support humans. In this work, we address this question in…
Standard decision theory seeks conditions under which a preference relation can be compressed into a single real-valued function. However, when preferences are incomplete or intransitive, a single function fails to capture the agent's…
This paper presents a comprehensive formalization of the von Neumann-Morgenstern (vNM) expected utility theorem using the Lean 4 interactive theorem prover. We implement the classical axioms of preference-completeness, transitivity,…
LLMs are increasingly used to make or support high-stakes decisions under uncertainty, where alignment depends not only on factual accuracy but on how models weigh tradeoffs between different outcomes. We present an empirical pipeline for…
Behavior of systems that are functions of anticipated behavior of other systems, whose own behavior is also anticipatory but homeostatic and determined by hierarchical ordering, which changes over time, of sets of possible environments that…