The theory of subjective expected utility has been recently extended to allow ambiguity to matter for choice. We propose a notion of absolute ambiguity aversion by building on a notion of comparative ambiguity aversion. We characterize it for a preference model which encompasses some of the most popular models in the literature. We next build on these ideas to provide a definition of unambiguou...

We provide a condition for rationalizability by risk-averse expected utility preference in a demand-based framework with multiple commodities, which is a UNCAF statement in the sense of Chambers et al. (2014). Our test can be viewed as a natural counterpart of a classical test of expected utility, due to Fishburn (1975), in a demand setting.

In this article, an individual’s tax-exempt bond porrfolio decision is investigated. A model capturing the relationship between income uncertainty and optimal portfolio choice is defined when an individual decision-maker has the opportunity to hold higher yielding private-activity bonds. The findings in this article show that in most cases risk-averse individuals will maximize the expected util...

The choice to enter and leave a romantic relationship can be framed as a decision-making problem based on expected utility of the partnership over time, akin to a forager deciding whether to stay in a particular patch based on the amount of resources it provides. We examined the temporal trajectory of three traits that may correspond to resources in romantic relationships—trust, love, and satis...

We study law enforcement mechanisms within a population of norm-governed learning agents. We show that a traditional analysis based on expected utility can be misleading, because learning agents tend to comply even though their surveillance is stopped. This has significant implications for the design of self-organising institutions with endogenous resources, where the cost of monitoring and nor...

This paper analyzes the information security investment decisions by a firm with two correlated information assets. When information assets are correlated, a firm may face additional losses compared to a loss from a single breach, and the probability of security breach on one set may increase the probability on the other. We model the security investment of a risk-taking firm as well as risk-ne...

In two-outcome strictly competitive games, equilibrium mixed strategies do not depend on ultimate prizes. Dixit and Skeath [Games of Strategy (1999) Norton, New York] find this ‘counter-intuitive’. We show this invariance comes from reduction, not independence; and provide conditions for ‘intuitive’ comparative statics under recursive expected utility.  2001 Elsevier Science B.V. All rights re...

In formalizing a ‘veil of ignorance’ type procedure, this paper considers how an agent’s preferences over a set of alternatives change as he is placed at an increasing ‘distance’ from the consequences of his choices. A definition for such ‘removed preferences’ is presented and its properties studied. As an application, it is demonstrated that decreasingly impatient agents are ‘essentially’ expo...

• Abstract. Expected utIlity theory, the most prom!­ nent economIc model of how Indwlduals choose among alternatwe risks, exhIbIts serIOus defIcIen­ CieS In describing emplncally observed behavIOr Consequently, economIsts are actwely searching for a new paradIgm to descnbe behavIOr under nsk TheIr mathematical tools, such as functIOnal anal­ ys~s and measure theory, reflect a new, more sOphr-st...

We provide a random variable characterization of the necessary and sufficient conditions for a shift of the distribution of rate of return on the risky asset in the two asset portfolio problem to reduce demand for all risk–averse expected utility maximizing investors. We provide random variable characterizations of the shifts that reduce both demand and expected utility for all risk–averse inve...