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Dynamic Choice Under Ambiguity
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Book Synopsis Dynamic Choice Under Ambiguity by : Marciano Siniscalchi
Download or read book Dynamic Choice Under Ambiguity written by Marciano Siniscalchi and published by . This book was released on 2006 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes sophisticated dynamic choice for ambiguity-sensitive decision makers. It characterizes Consistent Planning via axioms on preferences over decision trees. Furthermore, it shows how to elicit conditional preferences from prior preferences. The key axiom is a weakening of Dynamic Consistency, deemed Sophistication. The analysis accommodates arbitrary decision models and updating rules. Hence, the results indicate that (i) ambiguity attitudes, (ii) updating rules, and (iii) sophisticated dynamic choice are mutually orthogonal aspects of preferences. As an example, a characterization of prior-by-prior Bayesian updating and Consistent Planning for arbitrary maxmin-expected utility preferences is presented. The resulting sophisticated MEU preferences are then used to analyze the value of information under ambiguity; a basic trade-off between information acquisition and commitment is highlighted.
Book Synopsis Individual Vs. Group Decision Making by : Enrica Carbone
Download or read book Individual Vs. Group Decision Making written by Enrica Carbone and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Wiley Blackwell Handbook of Judgment and Decision Making, 2 Volume Set by : Gideon Keren
Download or read book The Wiley Blackwell Handbook of Judgment and Decision Making, 2 Volume Set written by Gideon Keren and published by John Wiley & Sons. This book was released on 2016-02-16 with total page 1056 pages. Available in PDF, EPUB and Kindle. Book excerpt: A comprehensive, up-to-date examination of the most important theory, concepts, methodological approaches, and applications in the burgeoning field of judgment and decision making (JDM) Emphasizes the growth of JDM applications with chapters devoted to medical decision making, decision making and the law, consumer behavior, and more Addresses controversial topics from multiple perspectives – such as choice from description versus choice from experience – and contrasts between empirical methodologies employed in behavioral economics and psychology Brings together a multi-disciplinary group of contributors from across the social sciences, including psychology, economics, marketing, finance, public policy, sociology, and philosophy 2 Volumes
Book Synopsis Handbook of the Economics of Risk and Uncertainty by : Mark Machina
Download or read book Handbook of the Economics of Risk and Uncertainty written by Mark Machina and published by Newnes. This book was released on 2013-11-14 with total page 897 pages. Available in PDF, EPUB and Kindle. Book excerpt: The need to understand the theories and applications of economic and finance risk has been clear to everyone since the financial crisis, and this collection of original essays proffers broad, high-level explanations of risk and uncertainty. The economics of risk and uncertainty is unlike most branches of economics in spanning from the individual decision-maker to the market (and indeed, social decisions), and ranging from purely theoretical analysis through individual experimentation, empirical analysis, and applied and policy decisions. It also has close and sometimes conflicting relationships with theoretical and applied statistics, and psychology. The aim of this volume is to provide an overview of diverse aspects of this field, ranging from classical and foundational work through current developments. Presents coherent summaries of risk and uncertainty that inform major areas in economics and finance Divides coverage between theoretical, empirical, and experimental findings Makes the economics of risk and uncertainty accessible to scholars in fields outside economics
Book Synopsis Rationality and Dynamic Choice by : Edward F. McClennen
Download or read book Rationality and Dynamic Choice written by Edward F. McClennen and published by Cambridge University Press. This book was released on 1990-05-25 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this major contribution to the theory of rational choice the author sets out the foundations of rational choice, and then sketches a dynamic choice framework in which principles of ordering and independence follow from a number of apparently plausible conditions. However there is potential conflict among these conditions, and when they are weakened to avoid it, the usual foundations of rational choice no longer prevail. The thrust of the argument is to suggest that the theory of rational choice is less determinate than many suppose.
Book Synopsis Dynamic Consistency and Ambiguity by : Brian Hill
Download or read book Dynamic Consistency and Ambiguity written by Brian Hill and published by . This book was released on 2019 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: It is commonly argued that dynamic consistency, consequentialism and non-expected utility are incompatible. The first aim of this paper is to rebut such arguments, by targeting the implicit assumption that the relevant contingencies correspond to objective resolutions of uncertainty (that is, events in a state space). These are not necessarily the same as the contingencies that the decision maker envisages, and we argue that any reasonable notion of dynamic consistency involves the latter, rather than the former, sort of contingency. We formulate such a version of dynamic consistency and show it to be compatible with consequentialism and non-expected utility. We then analyze the economic consequences of this new perspective. On the one hand, it provides a principled justification for restrictions on non-expected utility models (such as that proposed by Epstein and Schneider (2003)) in applications to dynamic choice problems. On the other hand, it provides a new analysis of the issue of attitude to information; contra standard arguments, the value of information under non-expected utility is non-negative as long as the information offered does not compromise information that the decision maker had otherwise expected to receive. Finally, we give a representation theorem for the contingencies the decision maker envisages, in the case where he uses the maxmin expected utility rule.
Book Synopsis Risk, Ambiguity and Decision by : Daniel Ellsberg
Download or read book Risk, Ambiguity and Decision written by Daniel Ellsberg and published by Routledge. This book was released on 2015-07-03 with total page 336 pages. Available in PDF, EPUB and Kindle. Book excerpt: Ellsberg elaborates on "Risk, Ambiguity, and the Savage Axioms" and mounts a powerful challenge to the dominant theory of rational decision in this book.
Book Synopsis Dynamic Decision Making Under Ambiguity by : Konstantinos Georgalos
Download or read book Dynamic Decision Making Under Ambiguity written by Konstantinos Georgalos and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Prospect Theory by : Peter P. Wakker
Download or read book Prospect Theory written by Peter P. Wakker and published by Cambridge University Press. This book was released on 2010-07-22 with total page 519 pages. Available in PDF, EPUB and Kindle. Book excerpt: Prospect Theory: For Risk and Ambiguity, provides a comprehensive and accessible textbook treatment of the way decisions are made both when we have the statistical probabilities associated with uncertain future events (risk) and when we lack them (ambiguity). The book presents models, primarily prospect theory, that are both tractable and psychologically realistic. A method of presentation is chosen that makes the empirical meaning of each theoretical model completely transparent. Prospect theory has many applications in a wide variety of disciplines. The material in the book has been carefully organized to allow readers to select pathways through the book relevant to their own interests. With numerous exercises and worked examples, the book is ideally suited to the needs of students taking courses in decision theory in economics, mathematics, finance, psychology, management science, health, computer science, Bayesian statistics, and engineering.
Book Synopsis Symbolic and Quantitative Approaches to Reasoning with Uncertainty by : Sébastien Destercke
Download or read book Symbolic and Quantitative Approaches to Reasoning with Uncertainty written by Sébastien Destercke and published by Springer. This book was released on 2015-07-11 with total page 551 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book constitutes the refereed proceedings of the 13th European Conference on Symbolic and Quantitative Approaches to Reasoning with Uncertainty, ECSQARU 2015, held in Compiègne, France, in July 2015. The 49 revised full papers presented were carefully reviewed and selected from 69 submissions and cover topics on decision theory and preferences; argumentation; conditionals; game theory; belief update; classification; inconsistency; graphical models; Bayesian networks; belief functions; logic; and probabilistic graphical models for scalable data analytics. Papers come from researchers interested in advancing the technology and from practitioners using uncertainty techniques in real-world applications. The scope of the ECSQARU conferences encompasses fundamental issues, representation, inference, learning, and decision making in qualitative and numeric uncertainty paradigms.
Book Synopsis Preference and Belief by : Chip Heath
Download or read book Preference and Belief written by Chip Heath and published by . This book was released on 1990 with total page 70 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Advances in Decision Making Under Risk and Uncertainty by : Mohammed Abdellaoui
Download or read book Advances in Decision Making Under Risk and Uncertainty written by Mohammed Abdellaoui and published by Springer Science & Business Media. This book was released on 2008-08-29 with total page 245 pages. Available in PDF, EPUB and Kindle. Book excerpt: Whether we like it or not we all feel that the world is uncertain. From choosing a new technology to selecting a job, we rarely know in advance what outcome will result from our decisions. Unfortunately, the standard theory of choice under uncertainty developed in the early forties and fifties turns out to be too rigid to take many tricky issues of choice under uncertainty into account. The good news is that we have now moved away from the early descriptively inadequate modeling of behavior. This book brings the reader into contact with the accomplished progress in individual decision making through the most recent contributions to uncertainty modeling and behavioral decision making. It also introduces the reader into the many subtle issues to be resolved for rational choice under uncertainty.
Book Synopsis Dynamic Inconsistency in Choice and Different Models of Dynamic Choice - A Review by : Gianna Lotito
Download or read book Dynamic Inconsistency in Choice and Different Models of Dynamic Choice - A Review written by Gianna Lotito and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, the problem of inconsistent dynamic choice is discussed, as considered in the literature, both under certainty in the context of changing preferences, and under risk and uncertainty in the case of preference orderings which violate expected utility theory. The problem of inconsistent choice in a dynamic decision situation has been initially analysed in the literature in a context of certainty and related to the problem of preferences changing exogenously through time. Hammond (1976,1977) generalises the analysis, but keeps it confined to a situation without risk or uncertainty, which he introduces only later (Hammond 1988a,b;1989). Hammond overcomes the distinction between exogenously and endogenously changing tastes and concentrates the analysis on the essential aspect of the problem - that preferences get reversed over time. This implies considering dynamic choice in a general framework. The discussion on dynamic inconsistency under certainty brings about the definition of two different models of behaviour: the myopic approach and the sophisticated approach.In a context of choice under risk and uncertainty, dynamic inconsistency occurs when preference orderings over risky or uncertain outcomes violate Expected Utility Theory, particularly through violation of the Independence Axiom. The problem of the dynamic inconsistency of non-expected utility agents is illustrated first through the arguments by Raiffa (1968). Raiffa frames the problem of inconsistent choice in the context of dynamic choice under risk, showing that dynamic consistency is not compatible with the usual choices in an Allais paradox when this is considered a decision problem in two stages. Then we discuss the two main models in this context, Machina (1989) and McClennen (1990), after having illustrated briefly the general theoretical debate on the justification of expected utility as a normative theory, in which the dynamic inconsistency argument and the two models are framed. Both models offer a similar - though formally different - solution to the problem of dynamic inconsistency in this context. Particular attention is given to McClennen's (1990) approach: the resolute approach. From the above discussion it emerges that McClennen also offers a formal and very complete model for sophisticated behaviour under risk and uncertainty. Therefore, we discuss two other approaches to this model of behaviour: Karni and Safra (1989b,1990), who elaborate a model of 'behavioural consistency' which represents a solution to the problem of dynamic inconsistency with non-expected utility preferences, extending to risk and uncertainty the sophisticated approach; and Dardanoni (1990), who frames the problem and discusses the limits of sophisticated choice in this context.
Book Synopsis The Economics of Risk and Time by : Christian Gollier
Download or read book The Economics of Risk and Time written by Christian Gollier and published by MIT Press. This book was released on 2001 with total page 492 pages. Available in PDF, EPUB and Kindle. Book excerpt: Updates and advances the theory of expected utility as applied to risk analysis and financial decision making.
Book Synopsis Decision Making Under Ambiguity by : Hillel J. Einhorn
Download or read book Decision Making Under Ambiguity written by Hillel J. Einhorn and published by . This book was released on 1986 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: Ellsberg's paradox demonstrates that ambiguous or vague probabilities derived from choices between gambles are not coherent. A descriptive model of judgement under ambiguity is developed in which an initial estimate serves as a starting point and adjustments are made for abbiguity. The adjustments involve a mental simulation in which higher and lower probabilities are considered and differentially weighted. Implications of this model include ambiguity avoidance and seeking; sub- and superadditivity of complementary probabilities; dynamic ambiguity; and reversals in the meaning of data. Three experiments involving Ellsberg's paradox and the setting of buying and selling prices for insurance and warranties test the model. A choice rule under ambiguity is developed that implies a lack of independence between ambiguous probabilities and the sign of payoff utility. The applicability of the model to the case where probabilities are explicitly stated is considered, including the handling of context effects. Keywords: Ambiguity, Decision making, Insurance.
Book Synopsis Models of Information Acquisition Under Ambiguity by : Jian Li
Download or read book Models of Information Acquisition Under Ambiguity written by Jian Li and published by . This book was released on 2012 with total page 79 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation studies models of dynamic choices under uncertainty with endogenous information acquisition. In particular we are interested in exploring the interactions between ambiguity attitudes and the incentive to collect new information. The first chapter explores the link between intrinsic preferences for information and ambiguity attitudes in settings with subjective uncertainty. We enrich the standard dynamic choice model in two dimensions. First, we introduce a novel choice domain that allows preferences to be indexed by the intermediate information, modeled as partitions of the underlying state space. Second, conditional on a given information partition, we allow preferences over state-contingent outcomes to depart from expected utility axioms. In particular we accommodate ambiguity sensitive preferences. We show that aversion to partial information is equivalent to a property of static preferences called Event Complementarity. We show that Event Complementarity and aversion to partial information are closely related to ambiguity attitudes. In familiar classes of ambiguity preferences, we identify conditions that characterize aversion to partial information. The second chapter extends the basic model to allow for choices from non-singleton menus after partial information is revealed, and studies the value of information under ambiguity. We show that the value of information is not monotonic under ambiguity. Intrinsic aversion to partial information in the basic model is equivalent to a preference for perfect information in the extended model. Moreover, the value of information is not monotone in the degree of ambiguity aversion. The third chapter studies the impact of ambiguity in a classic information acquisition model-the K-armed bandit problem. We consider a particular family of ambiguity averse preferences, the multiple-priors model [Marinacci, 2002]. A previous paper [Li, 2012] shows that major classic characterizations of optimal strategies in the K-armed bandit problems extend to incorporate ambiguity in the multiple-priors model. Here we explore new implications of ambiguity on the optimal incentive to experiment. First, increasing ambiguity in the unknown arm reduces the incentive to experiment, while increasing risk in the unknown arm typically increases the incentive to experiment. This suggests that ambiguity can offer an explanation for the widely observed under-experimentation in novel technology and consumer products. Second, optimal experimentation in the multiple-priors bandit problem generally cannot be reduced to that in a classic bandit problem with an equivalent single prior. In particular, the lower envelope of the classic single-prior Gittins-Jones index for every prior lying in the multiple-priors set can be strictly higher than the generalized multiple-prior Gittins-Jones index. In one-dimensional parametric family, we identify monotonicity conditions under which this discrepancy disappears so an equivalent single prior exists.
Book Synopsis Real Options, Ambiguity, Risk and Insurance by : A. Bensoussan
Download or read book Real Options, Ambiguity, Risk and Insurance written by A. Bensoussan and published by IOS Press. This book was released on 2013-05-02 with total page 296 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial engineering has become the focus of widespread media attention as a result of the worldwide financial crisis of recent years. This book is the second in a series dealing with financial engineering from Ajou University in Korea. The main objective of the series is to disseminate recent developments and important issues in financial engineering to graduate students and researchers, and to provide surveys or pedagogical exposition of important published papers in a broad perspective, as well as analyses of important financial news concerning financial engineering research, practices or regulations. Real Options, Ambiguity, Risk and Insurance, comprises 12 chapters and is divided into three parts. In Part I, five chapters deal with real options analysis, which addresses the issue of investment decisions in complex, innovative or risky projects. Part II presents three chapters on ambiguity. The notion of ambiguity is one of the major breakthroughs in the expected utility theory; ambiguity arises as uncertainties cannot be precisely described in the probability space. Part III consists of four chapters devoted to risk and insurance, and covers mutual insurance for non-traded risks, downside risk management, and credit risk in fixed income markets. This volume will be useful to both graduate students and researchers in understanding relatively new areas in economics and finance, as well as challenging aspects of mathematics.
