English

Decision-making under risk: when is utility maximization equivalent to risk minimization?

Theoretical Economics 2023-11-14 v1

Abstract

Motivated by the analysis of a general optimal portfolio selection problem, which encompasses as special cases an optimal consumption and an optimal debt-arrangement problem, we are concerned with the questions of how a personality trait like risk-perception can be formalized and whether the two objectives of utility-maximization and risk-minimization can be both achieved simultaneously. We address these questions by developing an axiomatic foundation of preferences for which utility-maximization is equivalent to minimizing a utility-based shortfall risk measure. Our axiomatization hinges on a novel axiom in decision theory, namely the risk-perception axiom.

Keywords

Cite

@article{arxiv.2311.07269,
  title  = {Decision-making under risk: when is utility maximization equivalent to risk minimization?},
  author = {Francesco Ruscitti and Ram Sewak Dubey and Giorgio Laguzzi},
  journal= {arXiv preprint arXiv:2311.07269},
  year   = {2023}
}

Comments

Accepted for publication in Theory and Decision

R2 v1 2026-06-28T13:19:14.969Z