|
on Utility Models and Prospect Theory |
| By: | Harin, Alexander |
| Abstract: | The proof of the theorem of existence of the ruptures, namely the proof of maximality, is improved. The theorem may be used in economics and explain the well-known problems such as Allais’ paradox. Illustrated examples of ruptures are presented. |
| Keywords: | utility; utility theory; probability; uncertainty; decisions; economics; Allais paradox; risk aversion; |
| JEL: | D81 C0 C44 G22 C02 C1 |
| Date: | 2011–12–31 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:35650&r=upt |
| By: | Nejat Anbarci; Nick Feltovich |
| Abstract: | We use a human–subjects experiment to investigate how bargaining outcomes are affected by changes in bargainers’disagreement payoffs. Subjects bargain against changing opponents, with an asymmetric disagreement outcome that varies over plays of the game. Both bargaining parties are informed of both disagreement payoffs (and the cake size) prior to bargaining. We find that bargaining outcomes do vary with the disagreement outcome, but subjects severely under–react to changes in their own disagreement payoff and to changes in the opponent’s disagreement payoff, relative to the risk–neutral prediction. This effect is observed in a standard Nash demand game and a related unstructured bargaining game, and for two different cake sizes varying by a factor of four. We show theoretically that standard models of expected utility maximisation are unable to account for this under–responsiveness – even when risk aversion is introduced. We also show that other–regarding preferences can explain our main results. |
| Keywords: | Nash demand game, unstructured bargaining, disagreement, experiment, risk aversion, social preference, other–regarding behaviour, bargaining power. |
| JEL: | C78 C72 D81 D74 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:mos:moswps:2011-36&r=upt |
| By: | Matoussi Anis; Possamai Dylan; Zhou Chao |
| Abstract: | In this article, we study the problem of robust utility maximization in an incomplete market with volatility uncertainty. The set of all possible models (probability measures) considered here is non-dominated. We propose to study this problem in the framework of second order backward stochastic differential equations introduced in Soner, Touzi and Zhang (2010) for Lipschitz continuous generator, then generalized by Possamai and Zhou (2011) in the quadratic growth case. We solve the problem for exponential, power and logarithmic utility functions and prove existence of an optimal strategy and of an optimal probability measure. Finally we provide several examples which shed more light and intuitions on the problem and its links with the classical utility maximisation one. |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1201.0769&r=upt |
| By: | Harin, Alexander |
| Abstract: | An introduction to interval analysis of distributions, as a new direction of interval analysis, is presented, including illustrated examples. New formulas and additional restrictions for intervals of moments, including mean value, are obtained. Among them are Novoselov formulas for moments and the so-called “Ring of formulas” for mean values. In the scope of the interval analysis of distributions, the ruptures for mean values are considered. The interval analysis of distributions may be used, e.g., in probability theory, modeling, forecasting, economics, utility theory. |
| Keywords: | interval analysis; distribution; mean value; moment; rupture; probability theory; utility theory; economics; modeling; |
| JEL: | C13 D81 D3 C0 C02 |
| Date: | 2011–12–31 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:35663&r=upt |