In this paper we analyse the effects arising from imposing a Value-at-Risk constraint in an agent's portfolio selection problem. The financial market is incomplete and consists of multiple risky assets (stocks) plus a risk-free asset. The stocks are modelled as exponential Brownian motions with...

This paper examines the foundations for comparing individuals and treatment subjects in experimental and other program evaluation contexts. We raise the question of multiattribute "characterization" of individuals both theoretically and statistically. The paper examines the information basis of...

SUMMARY: This note reviews consumers’ preference orderings in economics and shows that irrationality is a poor explanation for apparent violations of some axioms of order. Apparent violations seem to be better explained by the fact that consumers’ utility functions, if they exist at all,...

This paper prices defaultable bonds by incorporating inherent risks with the use of utility functions. By allowing risk preferences into the valuation of bonds, nonlinearity is introduced in their pricing. The utility-function approach affords the advantage of yielding exact solutions to the...

Several authors have indicated a contradiction between consistent aggregation of subjective beliefs and tastes, and a Pareto condition. We argue that the Pareto condition that implies the contradiction is not compelling. Society should not necessarily endorse a unanimous choice when it is based...

The management of introduced species that are both invasive and commercially valuable is contentious. While such species provide substantial economic benefits to some, they pose considerable costs to others due to negative impacts on ecosystems. We propose a decision framework to help balance...

Noncompensatory decision making forms a core part of poliheuristic theory. At the same time, decision making under constraints is a common view among expected utility theorists. It is argued that poliheuristic theory permits one to endogenize constraints. Views about the rules ofwar are used to...

We extend the pioneering work of Aumann–Serrano by presenting an index of riskiness for gambles with either positive or negative expectations. It can be of use for a variety of abstract behaviors, when adapting the framework of either Expected-Utility Theory or Prospect Theory.