Papers

Counterfactual utilities evaluate decisions not only by the realized outcome under a given decision, but also by the counterfactual outcomes that would arise under alternative decisions. By generalizing standard utility frameworks, they allow decision...

The classical expected utility (EU) axioms are not sufficient for finite datasets. There are a number of anomalies (violations of EU) where axioms are satisfied. This paper studies axioms that are immune to this problem and definitively delineate between...

A utility function has been proposed that values more lives that are lost than those that are saved. I do not dispute the ethical motivation behind this kind of asymmetry. However, I show with a simple example that the scope of applicability of such a...

I show how variational Bayes can be used as a microfoundation for a popular model of non-Bayesian updating.

Gul and Pesendorfer (2021, GP henceforth) introduce a theory of belief updating for ambiguous random variables. In their model, the decision maker’s uncertainty is described by a totally monotone capacity π, which is updated by first forming a so-called...

The drift diffusion model (DDM) is a model of sequential sampling with diffusion (Brownian) signals, where the decision maker accumulates evidence until the process hits a stopping boundary, and then stops and chooses the alternative that corresponds to...

 

We provide an axiomatic analysis of dynamic random utility, characterizing the stochastic choice behavior of agents who solve dynamic decision problems by maximizing some stochastic process (Ut) of utilities. We show first that even when (Ut) is...

We model the joint distribution of choice probabilities and decision times in binary decisions as the solution to a problem of optimal sequential sampling, where the agent is uncertain of the utility of each action and pays a constant cost per unit time...

We introduce a notion of coarse competitive equilibrium (CCE), to study agents' inability to tailor their consumption to the state of the economy. Our notion is motivated by limited cognitive ability (in particular attention, memory, and complexity) and...

As demonstrated by the email game of Rubinstein (1989), the predictions of the standard equilibrium models of game theory are sensitive to assumptions about the fine details of the higher order beliefs. This paper shows that models of bounded depth of...