Related papers: Prudence and higher-order risk attitudes in the ra…
Probabilistic risk aversion, defined through quasi-convexity in probabilistic mixtures, is a common useful property in decision analysis. We study a general class of non-monotone mappings, called the generalized rank-dependent functions,…
We study portfolio selection in a complete continuous-time market where the preference is dictated by the rank-dependent utility. As such a model is inherently time inconsistent due to the underlying probability weighting, we study the…
Employing a generalized definition of Pratt (1964) and Arrow's (1965, 1971) probability premium, we introduce a new concept of attitude towards probability. We illustrate in a problem of risk sharing that whether attitude towards…
When it comes to structural estimation of risk preferences from data on choices, random utility models have long been one of the standard research tools in economics. A recent literature has challenged these models, pointing out some…
We consider the construction of insurance premiums that are monotonically increasing with respect to a loading parameter. By introducing weight functions that are totally positive of higher order, we derive higher monotonicity properties of…
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,…
In random expected utility (Gul and Pesendorfer, 2006), the distribution of preferences is uniquely recoverable from random choice. This paper shows through two examples that such uniqueness fails in general if risk preferences are random…
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…
Consider an investor trading dynamically to maximize expected utility from terminal wealth. Our aim is to study the dependence between her risk aversion and the distribution of the optimal terminal payoff. Economic intuition suggests that…
We introduce a model-free preference under ambiguity, as a primitive trait of behavior, which we apply once as well as repeatedly. Its single and double application yield simple, easily interpretable definitions of ambiguity aversion and…
Stochastic dominance serves as a general framework for modeling a broad spectrum of decision preferences under uncertainty, with risk aversion as one notable example, as it naturally captures the intrinsic structure of the underlying…
Stochastic dominance is a preference relation of uncertain prospect defined over a class of utility functions. While this utility class represents basic properties of risk aversion, it includes some extreme utility functions rarely…
Robustness is often regarded as a critical future challenge for real-world applications, where stability is essential. However, as models often learn tasks in a similar order, we hypothesize that easier tasks will be easier regardless of…
We propose randomization tests of whether forecast 1 outperforms forecast 2 across a class of scoring functions. This hypothesis is of applied interest: While the prediction context often prescribes a certain class of scoring functions, it…
We extend well-known comparative results under expected utility to models of non-expected utility by providing novel conditions on local utility functions. We illustrate how our results parallel, and are distinct from, existing results for…
We find the perhaps surprising inequality that the weighted average of independent and identically distributed Pareto random variables with infinite mean is larger than one such random variable in the sense of first-order stochastic…
Higher order risk measures are stochastic optimization problems by design, and for this reason they enjoy valuable properties in optimization under uncertainties. They nicely integrate with stochastic optimization problems, as has been…
We study how to perform tests on samples of pairs of observations and predictions in order to assess whether or not the predictions are prudent. Prudence requires that that the mean of the difference of the observation-prediction pairs can…
Acquisition of data is a difficult task in many applications of machine learning, and it is only natural that one hopes and expects the population risk to decrease (better performance) monotonically with increasing data points. It turns…
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…