Related papers: Outside options and risk attitude
In this paper, we consider a risk-averse decision problem for controlled-diffusion processes, with dynamic risk measures, in which multiple risk-averse agents choose their decisions in such a way to minimize their individual accumulated…
Challenge Theory (CT), a new approach to decision under risk departs significantly from expected utility, and is based on firmly psychological, rather than economic, assumptions. The paper demonstrates that a purely cognitive-psychological…
Mutualistic relationships among the different species are ubiquitous in nature. To prevent mutualism from slipping into antagonism, a host often invokes a "carrot and stick" approach towards symbionts with a stabilizing effect on their…
We consider a decision maker (DM) who, before taking an action, seeks information by allocating her limited attention dynamically over different news sources that are biased toward alternative actions. Endogenous choice of information…
Whereas classical Markov decision processes maximize the expected reward, we consider minimizing the risk. We propose to evaluate the risk associated to a given policy over a long-enough time horizon with the help of a central limit…
We present a new decision rule, \emph{maximin safety}, that seeks to maintain a large margin from the worst outcome, in much the same way minimax regret seeks to minimize distance from the best. We argue that maximin safety is valuable both…
Humans display a tendency to pay more attention to bad outcomes, often in a disproportionate way relative to their statistical occurrence. They also display euphorism, as well as a preference for the current state of affairs (status quo…
We provide an economic interpretation of the practice consisting in incorporating risk measures as constraints in a classic expected return maximization problem. For what we call the infimum of expectations class of risk measures, we show…
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…
The existence of adversarial examples has led to considerable uncertainty regarding the trust one can justifiably put in predictions produced by automated systems. This uncertainty has, in turn, lead to considerable research effort in…
We study the upper and lower bounds for prices of European and American style options with the possibility of an external termination, meaning that the contract may be terminated at some random time. Under the assumption that the underlying…
Incarceration-diversion treatment programs aim to improve societal reintegration and reduce recidivism, but limited capacity forces policymakers to make prioritization decisions that often rely on risk assessment tools. While predictive,…
An insider is a team member who covertly deviates from the team's optimal collaborative strategy to pursue a private objective while still appearing cooperative. Such an insider may initially behave cooperatively but later switch to selfish…
The hidden-action model captures a fundamental problem of principal-agent theory and provides an optimal sharing rule when only the outcome but not the effort can be observed. However, the hidden-action model builds on various explicit and…
Situations where people have to decide between hurting themselves or another person are at the core of many individual and global conflicts. Yet little is known about how people behave when facing these situations in the lab. Here we report…
Different models to study the wealth distribution in an artificial society have considered a transactional dynamics as the driving force. Those models include a risk aversion factor, but also a finite probability of favoring the poorer…
Every time the customer (individual or company) has to release personal information to its service provider (e.g., an online store or a cloud computing provider), it faces a trade-off between the benefits gained (enhanced or cheaper…
This paper examines the degree to which an evader seeking a safe and efficient path to a target location can benefit from increasing levels of knowledge regarding one or more range-limited pursuers seeking to intercept it. Unlike previous…
We study how a decision-maker can acquire more information from an agent by reducing her own ability to observe what the agent transmits. In a large class of binary-action games, opacity design is just as good as full commitment to actions…
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…