scholarly journals Systemic optimal risk transfer equilibrium

2021 ◽  
Author(s):  
Francesca Biagini ◽  
Alessandro Doldi ◽  
Jean-Pierre Fouque ◽  
Marco Frittelli ◽  
Thilo Meyer-Brandis
Keyword(s):  
Expected Utility ◽  
Pareto Optimality ◽  
Utility Maximization ◽  
A Priori ◽  
Budget Constraint ◽  
Individual Rationality ◽  
Budget Constraints ◽  
Risk Transfer ◽  
Classical Notion ◽  
Novel Concept

AbstractWe propose a novel concept of a Systemic Optimal Risk Transfer Equilibrium (SORTE), which is inspired by the Bühlmann’s classical notion of an Equilibrium Risk Exchange. We provide sufficient general assumptions that guarantee existence, uniqueness, and Pareto optimality of such a SORTE. In both the Bühlmann and the SORTE definition, each agent is behaving rationally by maximizing his/her expected utility given a budget constraint. The two approaches differ by the budget constraints. In Bühlmann’s definition the vector that assigns the budget constraint is given a priori. On the contrary, in the SORTE approach, the vector that assigns the budget constraint is endogenously determined by solving a systemic utility maximization. SORTE gives priority to the systemic aspects of the problem, in order to optimize the overall systemic performance, rather than to individual rationality.

scholarly journals Reasoning about social preferences with uncertain beliefs

2021 ◽  
Author(s):  
isaac davis ◽  
Ryan W. Carlson ◽  
Yarrow Dunham ◽  
Julian Jara-Ettinger
Keyword(s):  
Expected Utility ◽  
Utility Maximization ◽  
Social Preference ◽  
Social Preferences ◽  
Social Judgments ◽  
Social Agents ◽  
Preference Reasoning ◽  
The Face ◽  
Expected Utility Maximization ◽  
Social Uncertainty

We propose a computational model of social preference judgments that accounts for the degree of an agents’ uncertainty about the preferences of others. Underlying this model is the principle that, in the face of social uncertainty, people interpret social agents’ behavior under an assumption of expected utility maximization. We evaluate our model in two experiments which each test a different kind of social preference reasoning: predicting social choices given information about social preferences, and inferring social preferences after observing social choices. The results support our model and highlight how un- certainty influences our social judgments.

Aid Motivation and Donor Behavior

2007 ◽  
Vol 5 (1) ◽  
Author(s):  
Shyam Nath ◽  
Keyword(s):  
Income Distribution ◽  
Utility Function ◽  
Foreign Aid ◽  
Utility Maximization ◽  
Analytical Framework ◽  
Budget Constraint ◽  
Aid Allocation ◽  
Donor Behavior ◽  
Trade Performance

This paper develops an analytical framework to explain foreign aid motivation and donor behavior, using an interdependent utility maximization framework, in which donor faces two constraints; its own budget constraint and the recipient's utility function. This paper specifically contributes to the literature on foreign aid by integrating the various objectives underlying aid allocation, namely recipient income and trade performance, international income distribution and donor reaction to fungibility. Between trade interest and international income distribution, the former is found to be a more common consideration in aid allocation. One of the important results is that the fungibility of foreign aid is established as a major problem so as to invite donor’s retaliation. However, the retaliatory response appears to co-exist with other motivations.

Specialist versus Generalist Decision Making

2018 ◽  
Author(s):  
Armin W. Schulz
Keyword(s):  
Decision Making ◽  
Expected Utility ◽  
Utility Maximization ◽  
Decision Rules ◽  
Mental States ◽  
Vast Array ◽  
Expected Utility Maximization

A number of scholars argue that human and animal decision making, at least to the extent that it is driven by representational mental states, should be seen to be the result of the application of a vast array of highly specialized decision rules. By contrast, other scholars argue that we should see human and animal representational decision making as the result of the application of a handful general principles—such as expected utility maximization—to a number of specific instances. This chapter shows that, using the results of chapters 5 and 6, it becomes possible to move this dispute forwards: the account of the evolution of conative representational decision making defended in chapter 6 together with the account of the evolution of cognitive representational decision making defended in chapter 5, makes clear that both sides of this dispute contain important insights, and that it is possible to put this entire dispute on a clearer and more precise foundation. Specifically, I show that differentially general decision rules are differentially adaptive in different circumstances: certain particular circumstances favor specialized decision making, and certain other circumstances favor more generalist decision making.

Conclusion

2020 ◽  
pp. 248-250
Author(s):  
Paul Weirich
Keyword(s):  
Expected Utility ◽  
Utility Maximization ◽  
Risk Principle ◽  
Expected Utility Maximization ◽  
The Mean ◽  
Mean Risk

Recognizing that an act’s risk is a consequence of the act yields a version of expected-utility maximization that does not need adjustments for risk in addition to the probabilities and utilities of possible outcomes. This treatment of an act’s risk justifies the expected-utility principle, and the mean-risk principle, for evaluation of an act. Rational attitudes to risks explain the rationality of acting in accord with the principles. They ground the separability relations that support the principles. The expected-utility principle justifies a substantive, and not just a representational, version of the decision principle of expected-utility maximization. Consequently, the principle governs a single choice and not just sets of choices. It demands more than consistency of the choices in a set. It demands that each choice follow the agent’s preferences, and these preferences explain the rationality of a choice that complies with the principle.

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