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I provide a model of deliberate stochastic choice over acts. In this model, the decision maker finds randomization desirable since it reduces responsibility and regret after the state uncertainty is resolved. I provide an axiomatic characterization of stochastic choices that are compatible with...
Persistent link: https://www.econbiz.de/10014262152
In household financial planning two types of risk are usually taken into account, that is – life-length risk and risk connected with financing. There are no research in which stochastic nature of the very financial goals is considered. Risk factors in this area may be different depending on...
Persistent link: https://www.econbiz.de/10013005575
Guided by evidence from eye-tracking studies of choice, pairwise comparison is assumed to be the building block of the decision-making procedure. A decision-maker with a rational preference may nevertheless consider the constituent pairwise comparisons gradually, easier comparisons preceding...
Persistent link: https://www.econbiz.de/10012415409
Among the reasons behind the choice behavior of an individual taking a stochastic form are her potential indifference or indecisiveness between certain alternatives, and/or her willingness to experiment in the sense of occasionally deviating from choosing a best alternative in order to give a...
Persistent link: https://www.econbiz.de/10013273770
Many theoretical models of stochastic choice are characterized by availability variation. Instead, most stochastic choice datasets have information on attribute values that vary across decision problems. This paper uses attribute variation to characterize a framework that encompasses existing...
Persistent link: https://www.econbiz.de/10012903045
Experimental work regularly finds that individual choices are not rationalized. Nonetheless, recent work shows that data collected from many individuals can be stochastically rationalized by a distribution of well-defined preferences. We study the relationship between deterministic and...
Persistent link: https://www.econbiz.de/10013238584
Observing that people often use categorization to simplify choice problems and follow some search order to make a choice, we develop and axiomatize a stochastic choice model in which the decision maker first categorizes alternatives in a menu into disjoint categories, then search over categories...
Persistent link: https://www.econbiz.de/10014127908
This paper introduces a dual problem to study a continuous-time consumption and investment problem with incomplete markets and Epstein-Zin stochastic differential utility. Duality between the primal and dual problems is established. Consequently the optimal strategy of this consumption and...
Persistent link: https://www.econbiz.de/10013001483
The endogenous grid method (EGM) significantly speeds up the solution of stochastic dynamic programming problems by simplifying or completely eliminating rootfinding. We propose a general and parsimonious EGM extended to handle 1) multiple continuous states and choices, 2) multiple occasionally...
Persistent link: https://www.econbiz.de/10012983815
We show that a steeply increasing workload before a deadline is compatible with time-consistent preferences. The key departure from the literature is that we consider a stochastic environment where success of effort is not guaranteed
Persistent link: https://www.econbiz.de/10013136247