Related papers: Outside options and risk attitude

We investigate a framework for robo-advisors to estimate non-expert clients' risk aversion using adaptive binary-choice questionnaires. We model risk aversion using cost functions and spectral risk measures in a static setting. We prove the…

A policymaker often wants to steer a decision-maker toward one of two actions, but lacks reliable knowledge of how the decision-maker perceives uncertainty or evaluates risk. We formalize a notion of robust paternalism: a modification a' of…

High dropout rates in tertiary education expose a lack of efficiency that causes frustration of expectations and financial waste. Predicting students at risk is not enough to avoid student dropout. Usually, an appropriate aid action must be…

It is common to encounter the situation with uncertainty for decision makers (DMs) in dealing with a complex decision making problem. The existing evidence shows that people usually fear the extreme uncertainty named as the unknown. This…

Decisions in organizations are about evaluating alternatives and choosing the one that would best serve organizational goals. To the extent that the evaluation of alternatives could be formulated as a predictive task with appropriate…

We propose a recursive logit model which captures the notion of choice aversion by imposing a penalty term that accounts for the dimension of the choice set at each node of the transportation network. We make three contributions. First, we…

The Brain Drain phenomenon is particularly heterogeneous and is characterized by peculiar specifications. It influences the economic fundamentals of both the country of origin and the host one in terms of human capital accumulation. Here,…

We consider decision problems under uncertainty where the options available to a decision maker and the resulting outcome are related through a causal mechanism which is unknown to the decision maker. We ask how a decision maker can learn…

An investor with constant relative risk aversion and an infinite planning horizon trades a risky and a safe asset with constant investment opportunities, in the presence of small transaction costs and a binding exogenous portfolio…

In this paper, we consider a risk-averse decision problem for controlled-diffusion processes, with dynamic risk measures, in which there are two risk-averse decision makers (i.e., {\it leader} and {\it follower}) with different risk-averse…

Decision makers sometimes cannot observe the consequences of their actions ex-post. This paper axiomatically characterizes a decision model in which the decision maker cares about verifying that a good consequence has been achieved.…

We study the problem of option pricing and hedging strategies within the frame-work of risk-return arguments. An economic agent is described by a utility function that depends on profit (an expected value) and risk (a variance). In the…

Recent work has considered theoretical models for the behavior of agents with specific behavioral biases: rather than making decisions that optimize a given payoff function, the agent behaves inefficiently because its decisions suffer from…

Risk is traditionally described as the expected likelihood of an undesirable outcome, such as collisions for autonomous vehicles. Accurately predicting risk or potentially risky situations is critical for the safe operation of autonomous…

Observation of other people's choices can provide useful information in many circumstances. However, individuals may not utilize this information efficiently, i.e., they may make decision-making errors in social interactions. In this paper,…

Strategy-proof mechanisms are widely used in market design. In an abstract allocation framework where outside options are available to agents, we obtain two results for strategy-proof mechanisms. They provide a unified foundation for…

In the persuasion model, apart from a few special cases, comparative statics has been an open question. We answer it, delineating which shifts of the sender's interim payoff lead her optimally to choose a more informative signal. Our first…

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…

Long-term planning, as in reinforcement learning (RL), involves finding strategies: actions that collectively work toward a goal rather than individually optimizing their immediate outcomes. As part of a strategy, some actions are taken at…

We introduce a strategic behavior in reinsurance bilateral transactions, where agents choose the risk preferences they will appear to have in the transaction. Within a wide class of risk measures, we identify agents' strategic choices to a…