Related papers: Outside options and risk attitude
Most work in mechanism design assumes that buyers are risk neutral; some considers risk aversion arising due to a non-linear utility for money. Yet behavioral studies have established that real agents exhibit risk attitudes which cannot be…
Adversarial risk analysis (ARA) is a relatively new area of research that informs decision-making when facing intelligent opponents and uncertain outcomes. It enables an analyst to express her Bayesian beliefs about an opponent's utilities,…
How do entrepreneurs act on their beliefs when probabilities of outcomes are unknown but subjectively perceived? We theorize that two distinct dimensions of ambiguity attitudes influence entrepreneurial action: ambiguity aversion - the…
People often interact repeatedly: with relatives, through file sharing, in politics, etc. Many such interactions are reciprocal: reacting to the actions of the other. In order to facilitate decisions regarding reciprocal interactions, we…
Navigation up a sensory gradient is one of the simplest behaviours, and the simplest strategy is run and tumble. But some organisms use other strategies, such as reversing direction or turning by some angle. Here we ask what drives the…
We show that many bounded rationality patterns of choice can be alternatively represented as testable models of limited consideration, and we elicit the features of the associated unobserved consideration sets from the observed choice.…
Diversification is the typical investment strategy of risk-averse agents. However, non-diversified positions that allocate all resources to a single asset, state of the world or revenue stream are common too. We show that whenever finitely…
We analyze and quantify, in a financial market with parameter uncertainty and for a Constant Relative Risk Aversion investor, the utility effects of two different boundedly rational (i.e., sub-optimal) investment strategies (namely, myopic…
The disposition effect describes investors' irrational behavior of selling profitable assets too soon while holding onto losing assets for too long. This study examines the impact of transparency at the firm level on the disposition effect…
Ambiguity-averse decision makers typically dislike not only the presence of ambiguous events but also their increase, contrary to what standard ambiguity models predict. We axiomatically study such a decision maker. She avoids ex ante…
We develop a structural econometric model to capture the decision dynamics of human evaluators on an online micro-lending platform, and estimate the model parameters using a real-world dataset. We find two types of biases in gender,…
We develop a model of wishful thinking that incorporates the costs and benefits of biased beliefs. We establish the connection between distorted beliefs and risk, revealing how wishful thinking can be understood in terms of risk measures.…
We suggest that one individual holds multiple degrees of belief about an outcome, given the evidence. We then investigate the implications of such noisy probabilities for a buyer and a seller of binary options and find the odds agreed upon…
The bystander effect is a social psychological phenomenon in which individuals are less likely to help a person potentially in need if there are others present. Sociologists and psychologists have proposed multiple plausible reasons for the…
We state the problem of inverse reinforcement learning in terms of preference elicitation, resulting in a principled (Bayesian) statistical formulation. This generalises previous work on Bayesian inverse reinforcement learning and allows us…
Understanding collision avoidance behavior is of key importance in traffic safety research and for designing and evaluating advanced driver assistance systems and autonomous vehicles. While existing experimental work has primarily focused…
Designing hierarchical reinforcement learning algorithms that exhibit safe behaviour is not only vital for practical applications but also, facilitates a better understanding of an agent's decisions. We tackle this problem in the options…
Standard measures of effect, including the risk ratio, the odds ratio, and the risk difference, are associated with a number of well-described shortcomings, and no consensus exists about the conditions under which investigators should…
In this paper I present a mathematically novel approach to the Prisoner's Dilemma. I do so by first defining recursively a distinct action type, what I call 'universalizing', that I add to the original prisoner's dilemma. Such a modified…
Under mean-variance-utility framework, we propose a new portfolio selection model, which allows wealth and time both have influences on risk aversion in the process of investment. We solved the model under a game theoretic framework and…