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Utility Theory
(Utility & Prospect & Decision Theories) (working papers mainly) See also Utility Theory metadata (articles mainly)
Contents (in new windows)
1. Utility Theory News. Quarterly News. 1.1. Institutions 1.2. Authors 1.3. Works 2. Utility Theory Items. Events: December November October September August July June May April March February January 2016 Undated 2015 Undated Archive 2014 2013 2012 2011 2010 2009 2008 2007 3. Utility Theory yearly Rankings 2016 2015 2014 4. Utility Theory Reviews & Analyses 5. Utility Theory Past, Timeless Events 6. Utility Theory Problems (St. Petersburg Paradox, Allais Paradox Equity Premium Puzzle, Risk Aversion, Gains and Losses Loss Aversion, Overweighting of low Probabilities Underweighting of high Probabilities, "Four-Fold-Pattern" Shape of Probability Weighting Function, Ellsberg Paradox) 7. New Approach. Principle of Uncertain Future 8. Solution of Utility Theory Problems (of St. Petersburg Paradox, of Allais Paradox, of Equity Premium Puzzle, of Risk Aversion, of Gains and Losses, of Loss Aversion, of Overweighting of low Probabilities, of Underweighting of high Probabilities, of "Four-Fold-Pattern" of Shape of Probability Weighting Function, of Ellsberg Paradox)
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1. Utility Theory News
Quarterly News (2020 quarter 2)
From Prospect Theory to Behavioural Welfare Economics Ivan Mitrouchev from HAL Abstract Time will tell: recovering preferences when choices are noisy Carlos Alos-Ferrer, Ernst Fehr and Nick Netzer from Department of Economics - University of Zurich Abstract Text On the concept of common utility Gilbert Giacomoni from HAL Abstract Text Introduction to sub-interval analysis. Estimations for the centers of gravity Alexander Harin from University Library of Munich, Germany Abstract Text All probabilities are equal, but some probabilities are more equal than others Christina Letsou, Shlomo Naeh and Uzi Segal from Boston College Department of Economics Abstract Text A Test of Information Aversion Christopher Kops and Illia Pasichnichenko from University of Heidelberg, Department of Economics Abstract Text Top
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June
From Prospect Theory to Behavioural Welfare Economics Ivan Mitrouchev from HAL Abstract Rational Choice Hypothesis as X-point of Utility Function and Norm Function Takeshi Kato, Yasuyuki Kudo, Junichi Miyakoshi, Jun Otsuka, Hayato Saigo, Kaori Karasawa, Hiroyuki Yamaguchi and Yasuo Deguchi from arXiv.org Abstract Text Relative utility bounds for empirically optimal portfolios Dmitry B. Rokhlin from arXiv.org Abstract Text A Systematic Test of the Independence Axiom Near Certainty Ritesh Jain and Kirby Nielsen from Institute of Economics, Academia Sinica, Taipei, Taiwan Abstract Text Time will tell: recovering preferences when choices are noisy Carlos Alos-Ferrer, Ernst Fehr and Nick Netzer from Department of Economics - University of Zurich Abstract Text Top
May
On the concept of common utility Gilbert Giacomoni from HAL Abstract Text Introduction to sub-interval analysis. Estimations for the centers of gravity Alexander Harin from University Library of Munich, Germany Abstract Text Relative Net Utility and the Saint Petersburg Paradox Daniel Muller and Tshilidzi Marwala from arXiv.org Abstract Text Prospect Theory and Stock Market Anomalies Nicholas C. Barberis, Lawrence Jin and Baolian Wang from National Bureau of Economic Research, Inc Abstract Text Top
April
All probabilities are equal, but some probabilities are more equal than others Christina Letsou, Shlomo Naeh and Uzi Segal from Boston College Department of Economics Abstract Text A Test of Information Aversion Christopher Kops and Illia Pasichnichenko from University of Heidelberg, Department of Economics Abstract Text The Aversion to Monetary Incentives for Changing Behavior Viola S. Ackfeld from University of Cologne, Department of Economics Abstract Text Valuation Risk Revalued Oliver de Groot, Alexander Richter and Nathaniel Throckmorton from C.E.P.R. Discussion Papers Abstract Text Top
March
A Lot of Ambiguity Zvi Safra and Uzi Segal from Boston College Department of Economics Abstract Text Behavioral sciences and auto-transformations of functions Alexander Harin from University Library of Munich, Germany Abstract Text Epstein-Zin Utility Maximization on Random Horizons Joshua Aurand and Yu-Jui Huang from arXiv.org Abstract Text Top
February
A Rationalization of the Weak Axiom of Revealed Preference Victor H. Aguiar, Per Hjertstrand and Roberto Serrano from Research Institute of Industrial Economics Abstract Text The political economy theorem Alessandro Saccal from University Library of Munich, Germany Abstract Text Stability of the indirect utility process Oleksii Mostovyi from arXiv.org Abstract Text Reference Dependence in Intertemporal Preference Zhihua Li and Songfa Zhong from Department of Economics, University of Birmingham Abstract Text Top
January
Long Term Care Insurance with State-Dependent Preferences Philippe De Donder from CIRANO Abstract Text Endowment Effects and Loss Aversion in the Risky Investment Game Stein Holden and Mesfin Tilahun from Norwegian University of Life Sciences, Centre for Land Tenure Studies Abstract Text Recover Dynamic Utility from Observable Process: Application to the economic equilibrium Nicole El Karoui and Mohamed MRad from HAL Abstract Text Prudence and preference for flexibility gain Daniel Danau from HAL Abstract Deriving utility: consumers’ diligence under externalities and technical progress Sergey Malakhov from University Library of Munich, Germany Abstract Text Non-stationary additive utility and time consistency Nicolas Drouhin from HAL Abstract Robust Identification of Investor Beliefs Xiaohong Chen, Lars Hansen and Peter Hansen from Becker Friedman Institute for Research In Economics Abstract Text Top
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Year 2017
December
Nonparametric analysis of random utility models Jorg Stoye and Yuichi Kitamura from Centre for Microdata Methods and Practice, Institute for Fiscal Studies Abstract Text Discrete Choice and Rational Inattention: a General Equivalence Result Mogens Fosgerau, Emerson Melo, Andre de Palma and Matthew Shum from University of Copenhagen. Department of Economics Abstract Text Eliciting Second-Order Beliefs Subir Bose and Arup Daripa from Birkbeck, Department of Economics, Mathematics & Statistics Abstract Text Necessary and Sufficient Conditions for Existence and Uniqueness of Recursive Utilities Jaroslav Borovicka and John Stachurski from arXiv.org Abstract Text Robust expected utility maximization with medial limits Daniel Bartl, Patrick Cheridito and Michael Kupper from arXiv.org Abstract Text A Pure Hedonic Theory of Utility and Status: Unhappy but Efficient Invidious Comparisons Pascal Courty and Merwan Engineer from C.E.P.R. Discussion Papers Abstract Text Top
November
Behavioral economics and auto-images of distributions of random variables Alexander Harin from University Library of Munich, Germany Abstract Text Homothetic Preferences Revealed Jan Heufer and Per Hjertstrand from Research Institute of Industrial Economics Abstract Text Optimizing S-shaped utility and implications for risk management John Armstrong and Damiano Brigo from arXiv.org Abstract Text Top
October
Non stationary additive utility and time consistency Nicolas Drouhin from HAL Abstract Text Robust Optimal Investment in Discrete Time for Unbounded Utility Function Laurence Carassus and Romain Blanchard from arXiv.org Abstract Text Utility maximization problem under transaction costs: optimal dual processes and stability Lingqi Gu, Yiqing Lin and Junjian Yang from arXiv.org Abstract Text When experienced and decision utility concur: The case of income comparisons Andrew Clark, Claudia Senik and Katsunori Yamada from HAL Abstract Top
September
Insider Trading With Different Risk Attitudes Wassim Daher, Harun Aydilek and Elias G. Saleeby from University Library of Munich, Germany Abstract Text Revealed preferences over risk and uncertainty Matthew Polisson, John Quah and Ludovic Renou from Department of Economics, University of St. Andrews Abstract Text Axioms for Measuring without mixing apples and Oranges O'Callaghan, Patrick from University Library of Munich, Germany Abstract Text On utility maximization without passing by the dual problem Miklos Rasonyi from arXiv.org Abstract Text Top
August
Representation of strongly independent preorders by vector-valued functions David McCarthy, Kalle Mikkola and Teruji Thomas from University Library of Munich, Germany Abstract Text July
On The “Scientificity” Of Microeconomics: Individual Demand, And Exchange-value Determination C-Rene Dominique from University Library of Munich, Germany Abstract Text The Degree Measure as Utility Function over Positions in Networks Rene (J.R.) van den Brink and Agnieszka Rusinowska from Tinbergen Institute Abstract Text Some estimations of the minimal magnitudes of forbidden zones in experimental data Alexander Harin from University Library of Munich, Germany Abstract Text Utility Maximisation for Exponential Levy Models with option and information processes Lioudmila Vostrikova from arXiv.org Abstract Text Il paradosso di S. Pietroburgo, una rassegna Ruggero Paladini from Istituto di Economia e Finanza, DIGEF, Sapienza University of Rome Abstract Text Back to Bentham, Should We? Large-Scale Comparison of Experienced versus Decision Utility Alpaslan Akay, Olivier Bargain and Xavier Jara from Institute for the Study of Labor (IZA) Abstract Text Top
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Year 2017
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2017 Undated
Boundedly Rational Expected Utility Theory Daniel Navarro-Martinez, Graham Loomes, Andrea Isoni, David Butler and Larbi Alaoui from University Library of Munich, Germany Abstract Text Subjective Mean Variance Preferences Without Expected Utility Xiangyu Qu from HAL Abstract About the minimal magnitudes of measurement’s forbidden zones. Version 1 Alexander Harin from University Library of Munich, Germany Abstract Text Dual Random Utility Maximisation Paola Manzini and Marco Mariotti from Department of Economics, University of St. Andrews Abstract Text Preferences: Neither Behavioural nor Mental Francesco Guala from Department of Economics, Management and Quantitative Methods at Universita degli Studi di Milano Abstract Text Sensitivity analysis for expected utility maximization in incomplete Brownian market models Julio Backhoff Veraguas and Francisco Silva from arXiv.org Abstract Text Can forbidden zones for the expectation explain noise influence in behavioral economics and decision sciences? Alexander Harin from University Library of Munich, Germany Abstract Text Top
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Year 2016
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2016 Undated
Nash equilibrium with discontinuous utility functions: Reny's approach extended Nikolai Kukushkin from University Library of Munich, Germany Abstract Text An inconsistency between certain outcomes and uncertain incentives within behavioral methods Alexander Harin from University Library of Munich, Germany Abstract Text Random Expected Utility and Certainty Equivalents: Mimicry of Probability Weighting Functions Nathaniel Wilcox from University Library of Munich, Germany Abstract Text Utilitarianism with and without expected utility David McCarthy, Kalle Mikkola and Teruji Thomas from University Library of Munich, Germany Abstract Text Dynamic consistency of expected utility under non-classical(quantum) uncertainty Vladimir Ivanovitch Danilov, Ariane Lambert-Mogiliansky and Vassili Vergopoulos from HAL Abstract Text Ellsberg Re-revisited: An Experiment Disentangling Model Uncertainty and Risk Aversion Loic Berger and Valentina Bosetti from Fondazione Eni Enrico Mattei (FEEM) Abstract Text Recursive utility maximization under partial information Shaolin Ji and Xiaomin Shi from arXiv.org Abstract Text Explaining rank-dependent utility with regret and rejoicing Christian Gollier from Toulouse School of Economics (TSE) Abstract Text Strategic behavior of non-expected utility players in games with payoff uncertainty T. Florian Kauffeldt from University of Heidelberg, Department of Economics Abstract Text Multivariate Stochastic Dominance for Risk Averters and Risk Seekers Xu Guo and Wing-Keung Wong from University Library of Munich, Germany Abstract Text Expected utility for nonstochastic risk Victor Ivanenko and Illia Pasichnichenko from University Library of Munich, Germany Abstract Text Utility maximization problem with random endowment and transaction costs: when wealth may become negative Yiqing Lin and Junjian Yang from arXiv.org Abstract Text Recent Developments in the Experimental Elicitation of Time Preference Stephen Cheung from Institute for the Study of Labor (IZA) Abstract Text The Ellsberg paradox: A challenge to quantum decision theory? Ali al-Nowaihi and Sanjit Dhami from Department of Economics, University of Leicester Abstract Text A General Optimal Investment Model in the Presence of Background Risk Moawia Alghalith, Xu Guo, Wing-Keung Wong and Lixing Zhu from University Library of Munich, Germany Abstract Text Dual Random Utility Maximisation Paola Manzini and Marco Mariotti from Department of Economics, University of St. Andrews Abstract Text Measuring utility without mixing apples and oranges and eliciting beliefs about stock prices O'Callaghan, Patrick from University Library of Munich, Germany Abstract Text Dual Random Utility Maximisation Paola Manzini and Marco Mariotti from Department of Economics, University of St. Andrews Abstract Text Non stationary additive utility and time consistency Nicolas Drouhin from HAL Abstract Text Choice - Based Cardinal Utility. A Tribute to Patrick Suppes Philippe Mongin and Jean Baccelli from HEC Paris Abstract Text Ambiguity Framed Mark Schneider, Jonathan Leland and Nathaniel Wilcox from Chapman University, Economic Science Institute Abstract Text Measuring loss aversion under ambiguity: a method to make prospect theory completely observable Mohammed Abdellaoui, Han Bleichrodt, Olivier L'Haridon and Van Dolder Dennie from HAL Abstract Text
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Year 2015
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2015 Undated
A Strict Stochastic Utility Theorem Matthew Ryan in Economics Bulletin Abstract Text Non stationary additive utility and time consistency Nicolas Drouhin from HAL Abstract Text Risk Aversion in the Small and in the Large under Rank-Dependent Utility Louis R. Eeckhoudt and Roger J. A. Laeven from arXiv.org Abstract Text Monotone Stochastic Choice Models: The Case of Risk and Time Preferences Jose Apesteguia and Miguel Angel Ballester from Barcelona Graduate School of Economics Abstract Text Problems of utility and prospect theories. A “certain–uncertain” inconsistency within their experimental methods Alexander Harin from University Library of Munich, Germany Abstract Text Some (Mis)facts about Myopic Loss Aversion Inigo Iturbe-Ormaetxe Kortajarene, Giovanni Ponti and Josefa Tomas Lucas from Instituto Valenciano de Investigaciones Economicas, S.A. (Ivie) Abstract Text Monotone stochastic choice models: The case of risk and time preferences Jose Apesteguia and Miguel A. Ballester from Department of Economics and Business, Universitat Pompeu Fabra Abstract Text The limit of discounted utilitarianism Adam Jonsson and Mark Voorneveld from Stockholm School of Economics Abstract Text Stochastic Dominance of Any Type and Any Degree, and Expected Utility: A Unifying Approach Andre Lapidus from HAL Abstract Text An existence theorem for bounds on the expectation of a random variable. Its opportunities for utility theories. V. 2 Alexander Harin from University Library of Munich, Germany Abstract Text Ambiguity, Optimism, and Pessimism in Adverse Selection Models Raphael Giraud and Lionel Thomas from HAL Abstract Text Preference Cloud Theory: Imprecise Preferences and Preference Reversals Oben Bayrak and John Hey from CERE - the Center for Environmental and Resource Economics Abstract Text Shadow price in the power utility case Attila Herczegh and Vilmos Prokaj from arXiv.org Abstract Text Utility maximization in pure-jump models driven by marked point processes and nonlinear wealth dynamics Mauricio Junca and Rafael Serrano from arXiv.org Abstract Text Utility Maximisation for Exponential Levy Models with option and information processes Lioudmila Vostrikova from arXiv.org Abstract Text The Fundamental Nature of HARA Utility Gadi Perets and Eran Yashiv from Centre for Macroeconomics (CFM) Abstract Text Bridging the Attitude-Preference-Gap: A Cognitive Approach To Preference Formation Rebecca Schmitt from University Library of Munich, Germany Abstract Text Revealed preferences over risk and uncertainty Matthew Polisson, John Quah and Ludovic Renou from Institute for Fiscal Studies Abstract Text A BSDE arising in an exponential utility maximization problem in a pure jump market model Carla Mereu and Robert Stelzer from arXiv.org Abstract Text Measurement Scales and Welfarist Social Choice Michael Morreau and John Weymark from Vanderbilt University Department of Economics Abstract Text Stochastic dominance, risk and disappointment: a synthesis Thierry Chauveau from HAL Abstract Text Now you see it, now you don’t: How to make the Allais Paradox appear, disappear, or reverse Pavlo Blavatskyy, Andreas Ortmann and Valentyn Panchenko from School of Economics, The University of New South Wales Abstract Text Is Prelec’s function discontinuous at p = 1? (for the Einhorn Award of SJDM) Alexander Harin from University Library of Munich, Germany Abstract Text An existence theorem for restrictions on the mean in the presence of a restriction on the dispersion Alexander Harin from University Library of Munich, Germany Abstract Text “Luce problem” and discontinuity of Prelec’s function at p = 1 Alexander Harin from University Library of Munich, Germany Abstract Text Sensitivity analysis for expected utility maximization in incomplete brownian market models Julio Backhoff and Francisco Silva from arXiv.org Abstract Text Delay Functions as the Foundation of Time Preference: Testing for Separable Discounted Utility Keith Marzilli Ericson and Jawwad Noor from National Bureau of Economic Research, Inc Abstract Text Singular recursive utility Kristina R. Dahl and Bernt {\O}ksendal from arXiv.org Abstract Text A conceptual foundation for the theory of risk aversion Yonatan Aumann from The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem 2015 Abstract Text Recursive utility using the stochastic maximum principle Knut Aase from Department of Business and Management Science, Norwegian School of Economics Abstract Text Skewed Noise David Dillenberger and Uzi Segal from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania Abstract Text Optimism and Pessimism with Expected Utility, Fifth Version David Dillenberger, Andrew Postlewaite and Kareen Rozen from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania Abstract Text Back to Bentham: should we? Large-scale comparison of decision versus experienced utility for income-leisure preferences Alpaslan Akay, Olivier Bargain and Holguer Xavier Jara Tamayo from Institute for Social and Economic Research Abstract Text Revealed preferences over risk and uncertainty John Quah, Matthew Polisson and Ludovic Renou from University of Oxford, Department of Economics Abstract Text Utility maximization with current utility on the wealth: regularity of solutions to the HJB equation Salvatore Federico, Paul Gassiat and Fausto Gozzi from arXiv.org Abstract Text Eliciting utility curvature and time preference Stephen Cheung from University of Sydney, School of Economics Abstract Text Memory Utility Itzhak Gilboa, Andrew Postlewaite and Larry Samuelson from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania Abstract Text Dimensional Analysis of Production and Utility Functions in Economics Minseong Kim from University Library of Munich, Germany Abstract Text An axiomatization of Choquet expected utility with cominimum independence Takao Asano and Hiroyuki Kojima in Theory and Decision Abstract Text Tailored proper scoring rules elicit decision weights Arthur Carvalho in Judgment and Decision Making Abstract Text Dynamic portfolio selection with mispricing and model ambiguity Bo Yi, Frederi Viens, Baron Law and Zhongfei Li in Annals of Finance Abstract Text Do Respondents Adjust Their Expected Utility in the Presence of an Outcome Certainty Attribute in a Choice Experiment? John Rolfe and Jill Windle in Environmental & Resource Economics Abstract Text General dual measures of riskiness Klaas Schulze in Theory and Decision Abstract Text A class of symmetric and quadratic utility functions generating Giffen demand Massimiliano Landi in Mathematical Social Sciences Abstract Text Does ambiguity matter? Estimating asset pricing models with a multiple-priors recursive utility Daehee Jeong, Hwagyun Kim and Joon Y. Park in Journal of Financial Economics Abstract Text Entropy Man John Bryant from Economic Consultancy, Vocat International Abstract Text Choice theory when agents can randomize Jorg Stoye in Journal of Economic Theory Abstract Text Paradox-Proof Utility Functions for Heavy-Tailed Payoffs: Two Instructive Two-Envelope Problems Michael Powers in Risks Abstract Text The effects of uncertainty on the WTA–WTP gap Robert Reilly and Douglas Davis in Theory and Decision Abstract Text Tractable valuations under uncertainty Jozsef Sakovics in Economics Letters Abstract Text A rank-dependent utility model of uncertain lifetime Nicolas Drouhin in Journal of Economic Dynamics and Control Abstract Text Sharing ambiguous risks Surajeet Chakravarty and David Kelsey in Journal of Mathematical Economics Abstract Text Piecewise Additivity for Nonexpected Utility Craig Webb from Economics, The University of Manchester Abstract Text Dynamic Consistent alpha-Maxmin Expected Utility Patrick Bei?ner and Qian Lin from Bielefeld University, Center for Mathematical Economics Abstract Text Decision making in phantom spaces Yehuda Izhakian and Zur Izhakian in Economic Theory Abstract Text The Implementation Duality Georg Noldeke and Larry Samuelson from Faculty of Business and Economics - University of Basel Abstract Text Top
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3. Utility Theory yearly Rankings
Year 2016
Top 2016 institutions in the field of Utility Models & Prospect Theory (#, (rank), name): 1. (1,82) Department of Economics, Harvard University 2. (5,18) Department of Ec-cs, University of California-San Diego 3. (5,37) Department of Economics, Boston University 4. (7,32) Department of Economics, Columbia University 5. (8,25) Paris School of Economics 6. (9,98) Department of Economics, New York University 7. (10,51) National Bureau of Economic Research (NBER) 8. (12,14) Toulouse School of Economics (TSE) 9. (13,96) Faculteit der Economische Wetenschappen, Erasmus Universiteit Rotterdam 10. (14,48) School of Economics, University of Nottingham Top 2016 authors in the field of Utility Models & Prospect Theory (#, (rank), name): 1. (3,81) Larry G. Epstein 2. (4,83) Harry M. Markowitz 3. (5,14) Edi Karni 4. (5,23) Olivier J Blanchard 5. (7,51) Edmund S. Phelps 6. (7,56) Peter P. Wakker 7. (8,99) David A. Hensher 8. (12,82) Glenn W. Harrison 9. (13,93) Massimo Marinacci 10. (14,58) Andrei Shleifer Top
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Year 2015
Top 2015 institutions in the field of Utility Models & Prospect Theory (#, (rank), name): 1. (1,43) Department of Economics, Harvard University 2. (4,09) Department of Economics, Boston University 3. (4,23) Faculteit der Economische Wetenschappen, Erasmus Universiteit Rotterdam 4. (4,29) Department of Ec-cs, University of California-San Diego 5. (6,17) Paris School of Economics 6. (7,14) Department of Economics, Oxford University 7. (7,88) Department of Economics, New York University 8. (7,97) National Bureau of Economic Research (NBER) 9. (12,18) London School of Economics (LSE) 10. (12,45) School of Economics, University of Nottingham Top 2015 authors in the field of Utility Models & Prospect Theory (#, (rank), name): 1. (2,30) Peter P. Wakker 2. (3,36) Larry G. Epstein 3. (4,25) Harry M. Markowitz 4. (6,23) Edi Karni 5. (8,34) Glenn W. Harrison 6. (11,12) Andrei Shleifer 7. (13,46) Robert Sugden 8. (14,06) Tim Bollerslev 9. (14,16) Charles F. Manski 10. (14,25) David Easley Top
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Year 2014
Top 2014 institutions in the field of Utility Models & Prospect Theory (#, (rank), name): 1. (1,46) Department of Economics, Harvard University 2. (3,29) Department of Economics, Boston University 3. (3,40) Faculteit der Economische Wetenschappen, Erasmus Universiteit Rotterdam 4. (3,57) Department of Economics, Oxford University 5. (4,93) Department of Economics, University of California-San Diego 6. (5,48) Paris School of Economics 7. (5,73) National Bureau of Economic Research (NBER) 8. (12,20) Toulouse School of Economics (TSE) 9. (14,52) London School of Economics (LSE) 10. (14,65) Anderson Graduate School of Management, University of California-Los Angeles (UCLA) Top 2014 authors in the field of Utility Models & Prospect Theory (#, (rank), name): 1. (1,56) Peter P. Wakker 2. (2,88) Larry G. Epstein 3. (5,48) Harry M. Markowitz 4. (7,50) Andrei Shleifer 5. (8,32) Peter E. Rossi 6. (9,43) Edi Karni 7. (9,68) Robert Sugden 8. (10,25) Charles F. Manski 9. (11,24) Glenn W. Harrison 10. (11,80) Colin Camerer Top
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4. Utility Theory Reviews & Analyses
The Foundations of Behavioral Economic Analysis Sanjit Dhami Kindle Edition 2016 Abstract Annotated references on decisions and uncertainty (thousands of references and comments (AH)) Peter P. Wakker Erasmus School of Economics, Behavioral Economics, Peter P. Wakker personal page. Ref-s: 1921-2015. Abstract Text Thirty Years of Prospect Theory in Economics: A Review and Assessment Nicholas C. Barberis Journal of Economic Perspectives 2013 Abstract Text Is There A Plausible Theory for Risky Decisions? James C. Cox, Vjollca Sadiraj, Bodo Vogt and Utteeyo Dasgupta Experimental Economics Center, Andrew Young School... 2007-06 Abstract Text Economists and uncertainty John Quiggin and Robert G. Chambers Risk and Sustainable Management Group, University ... 2005 Title Text Investigating Generalizations of Expected Utility Theory Using Experimental Data John Hey and Chris Orme Econometrica 1994 Abstract The Expected Utility Model: Its Variants, Purposes, Evidence and Limitations Paul J H Schoemaker Journal of Economic Literature 1982 Title Top
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Utility Theory
Events 5. Past, Timeless Anomalies: Utility Maximization and Experienced Utility Daniel Kahneman and Richard H. Thaler Journal of Economic Perspectives 2006 Abstract Text of the corresponding Working Paper Advances in Prospect Theory: Cumulative Representation of Uncertainty Amos Tversky and Daniel Kahneman Journal of Risk and Uncertainty 1992 Title Prospect Theory: An Analysis of Decision under Risk Daniel Kahneman and Amos Tversky Econometrica 1979 Title Risk, Ambiguity, and the Savage Axioms Daniel Ellsberg The Quarterly Journal of Economics 1961 Abstract Le comportement de l'homme rationnel devant le risque: critique des postulats et axiomes de l'Ecole Americaine Maurice Allais Econometrica 1953 Title Theory of Games and Economic Behavior John von Neumann and Oskar Morgenstern Princeton University Press 1944 Table of contents Text (txt 1.6 MB) Text (pdf 33 MB) An Introduction to the Principles of Morals and Legislation Jeremy Bentham The Online Library of Liberty 1823 Contents Text Exposition of a New Theory on the Measurement of Risk Daniel Bernoulli Commentarii Academiae Scientiarum Imperialis Petropolitanae 1738 Title Top
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6. Utility Theory Problems & Paradoxes
(more)
The Allais paradox (modified)
Suppose Mr. Somebody offers you a choice of only one of the following: A guaranteed gain of $99. Or A lottery: The gain of $100 with the probability P(preliminary) = 99% or $0 with the (preliminary) probability 1%. The mathematical expectations of guarantee and lottery outcomes are exactly the same. But people chose the guaranteed gain instead of the lottery. Top
Gains and Losses
Compare two experiments: 1) Mr. Somebody offers you a choice of only one of the following: A guaranteed gain of $99. Or A lottery: The gain of $100 with the probability P(preliminary) = 99% or $0 with the (preliminary) probability 1%. 2) Mr. Somebody offers you a choice of only one of the following: A guaranteed loss of $99. Or A lottery: The loss of $100 with the probability P(preliminary) = 99% or $0 with the (preliminary) probability 1%. The mathematical expectations of the guarantee and lottery outcomes are exactly the same in both experiments. But in similar experiments, the overwhelming majority of people chose: - in the case of gains - the guaranteed gain instead of the lottery one. - in the case of losses - the lottery loss instead of the guaranteed one. The possible well-known "natural and clear explanation" of gains in the Allais paradox by means of risk aversion cannot supply any uniform explanation for both gains and losses. The result of this explanation is gains' risk aversion and losses' risk seeking. Top
Overweighting of low Probabilities
Suppose Mr. Somebody offers you a choice of only one of the following: A guaranteed gain of $1. Or A lottery: The gain of $100 with the probability P(preliminary) = 1% or $0 with the (preliminary) probability 1%. The mathematical expectations of guarantee and lottery outcomes are exactly the same. But the well-determined experimental fact is: in similar experiments the obvious majority of people chose the lottery instead of the guaranteed gain.
Four-Fold-Pattern
The well-determined facts are: For positive (gains) risky prospects, people typically 1) overweight low probabilities but 2) underweight high probabilities. For negative (losses) risky prospects, people typically 3) underweight low probabilities but 4) overweight high probabilities. Top
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7. New Approach
(more)
The idea of the approach
Particular consideration of (hidden) uncertainties (noises, fluctuations, measurements' errors, imprecision, etc.)
Principle of Uncertain Future
(simplified as much as possible)
The principle
The probability of a future event contains uncertainty.
7.1. The first consequence of the principle
Suppose we plan to test the probability value, which is equal to 99%. Suppose the probability uncertainty value is equal to 5%. Then, evidently, the real mean value of probability cannot be as high as 99%. Generally, High probabilities will decrease.
Phigh real < Phigh planned
Analogously, but considering the second consequence of the principle (see below),
Low probabilities can increase.
Plow real possible > Plow planned
7.2. The second consequence of the principle
The total probability of unforeseen future events is more than 0%
Σ Punforeseen real > 0%
Hence,
The present total probability of future events is less than 100%
Σ Pplanned < 100%
or
The present probability system of future events is incomplete. Top
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8. Solution of Utility Theory Problems
(more)
The strongest qualitative test is the 4-Fold-Pattern.
Solution & Explanation
of the Four-Fold-Pattern (simplified as much as possible) The well-determined facts are: For positive (gains) risky prospects, people typically 1) overweight low probabilities but 2) underweight high probabilities. For negative (losses) risky prospects, people typically 3) underweight low probabilities but 4) overweight high probabilities. Denoting the real value of probability, which value is near 100% as Phigh real , the (positive) value of gain as G and the (negative) value of loss as -G , we obtain
Phigh real < Phigh planned
and
G * Phigh real < G * Phigh planned
-G * Phigh real > -G * Phigh planned
2) the underweight of high probabilities gains and 4) the overweight of high probabilities losses. Denoting the real value of probability, which value is near 0% as Plow real possible we obtain
Plow real possible > Plow planned
and
G * Plow real possible > G * Plow planned
-G * Plow real possible < -G * Plow planned
1) the overweight of low probabilities gains and 3) the underweight of low probabilities losses. Thus, the above facts can be explained naturally and uniformly. Top
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