Optimized Certainty Equivalents for Decisions Under Uncertainty

Abstract

A new approach is proposed for some models of decision-making under uncertainty, using optimized certainty-equivalents induced by expected-utility. Applications to production, investment and inventory models demonstrate the advantages of the new approach. Expected utility theory is 'the major paradigm in decision making.... It has been used prescriptively in management science (especially decision analysis), predictively in finance and economics, descriptively by psychologists... The expected utility (EU) model has consequently been the focus of much theoretical and empirical research.... In spite of its power, elegance and success, considerable criticism has been directed at the EU theory, specially when used descriptively to model the decision processes underlying risky choice. In this context, evidence refuting the validity of the EU model axioms is relevant.

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Document Details

Document Type
Technical Report
Publication Date
Dec 01, 1986
Accession Number
ADA176065

Entities

People

  • A. Ben-israel
  • A. Ben-tal

Organizations

  • University of Texas at Austin

Tags

Communities of Interest

  • Human Systems

DTIC Thesaurus Topics

  • Abstracts
  • Additives (Chemicals)
  • Business Administration
  • Economics
  • Elastic Properties
  • Engineering
  • Finance
  • Inventory
  • Investments
  • Money
  • Production
  • Random Variables
  • Taxes
  • Theorems
  • Uncertainty
  • United States
  • Universities

Fields of Study

  • Economics

Readers

  • International Relations and European Studies
  • Team-Based Human-Centered Cognitive Task Decision Making and Information Performance.
  • Theoretical Analysis.