Related papers: Utility Function from Maximum Entropy Principle
Decision theory does not traditionally include uncertainty over utility functions. We argue that the a person's utility value for a given outcome can be treated as we treat other domain attributes: as a random variable with a density…
Functions or 'functionings' enable to give a structure to any activity and their combinations constitute the capabilities which characterize economic assets such as work utility. The basic law of supply and demand naturally emerges from…
We provide sufficient conditions under which a utility function may be recovered from a finite choice experiment. Identification, as is commonly understood in decision theory, is not enough. We provide a general recoverability result that…
Orseau and Ring, as well as Dewey, have recently described problems, including self-delusion, with the behavior of agents using various definitions of utility functions. An agent's utility function is defined in terms of the agent's history…
The thermodynamic definition of entropy can be extended to nonequilibrium systems based on its relation to information. To apply this definition in practice requires access to the physical system's microstates, which may be prohibitively…
We establish when the two problems of minimizing a function of lifetime minimum wealth and of maximizing utility of lifetime consumption result in the same optimal investment strategy on a given open interval $O$ in wealth space. To answer…
Maximum Entropy is a powerful concept that entails a sharp separation between relevant and irrelevant variables. It is typically invoked in inference, once an assumption is made on what the relevant variables are, in order to estimate a…
In statistical physics, the conservation of particle number results in the equalization of the chemical potential throughout a system at equilibrium. In contrast, the homogeneity of utility in socio-economic models is usually thought to…
Risk and utility functionals are fundamental building blocks in economics and finance. In this paper we investigate under which conditions a risk or utility functional is sensitive to the accumulation of losses in the sense that any…
We consider the robust exponential utility maximization problem in discrete time: An investor maximizes the worst case expected exponential utility with respect to a family of nondominated probabilistic models of her endowment by…
Standard approaches to the theory of financial markets are based on equilibrium and efficiency. Here we develop an alternative based on concepts and methods developed by biologists, in which the wealth invested in a financial strategy is…
The effectiveness of utility-maximization techniques for portfolio management relies on our ability to estimate correctly the parameters of the dynamics of the underlying financial assets. In the setting of complete or incomplete financial…
Since the 1960s, the question whether markets are efficient or not is controversially discussed. One reason for the difficulty to overcome the controversy is the lack of a universal, but also precise, quantitative definition of efficiency…
We study the two-times differentiability of the value functions of the primal and dual optimization problems that appear in the setting of expected utility maximization in incomplete markets. We also study the differentiability of the…
Although both systems analyzed are described through two theories apparently different (quantum mechanics and game theory) it is shown that both are analogous and thus exactly equivalents. The quantum analogue of the replicator dynamics is…
The theory of thermal macroeconomics (TM) analyses economic phenomena within the mathematical framework of classical thermodynamics, using a set of axioms that apply to the purely macroscopic aspects of an economy [CM]. The theory shows…
The concept of Relative Divergence of one Grading Function from another is extended from totally ordered chains to power sets of finite event spaces. Shannon Entropy concept is extended to normalized grading functions on such power sets.…
We study the utility maximization problem for power utility random fields in a semimartingale financial market, with and without intermediate consumption. The notion of an opportunity process is introduced as a reduced form of the value…
Recommendations based on behavioral data may be faced with ambiguous statistical evidence. We consider the case of association rules, relevant e.g.~for query and product recommendations. For example: Suppose that a customer belongs to…
We treat utility maximization from terminal wealth for an agent with utility function $U:\mathbb{R}\to\mathbb{R}$ who dynamically invests in a continuous-time financial market and receives a possibly unbounded random endowment. We prove the…