Expected Utility Strategic Decision Models for General Insurers

Representing risk preferences in expected utility based decision models

The application and estimation of expected utility based decision models would benefit from having additional simple and flexible functional forms to represent risk preferences. The literature so far has provided these functional forms for the utility function itself. This work shows that functional forms for the marginal utility function are as useful, are easier to provide, and can represent ...

Two-parameter Decision Models and Rank- Dependent Expected Utility

Distribution of expected utility in decision trees

Evaluation of decision trees in which imprecise information prevails is complicated. Especially when the tree has some depth, i.e. consists of more than one level, the effects of the choice of representation and evaluation procedures are significant. Second-order representation and evaluation may significantly increase a decision-maker’s understanding of a decision situation when handling aggre...

Stock Selection for Portfolios Using Expected Utility-Entropy Decision Model

Yang and Qiu proposed and then recently improved an expected utility-entropy (EU-E) measure of risk and decision model. When segregation holds, Luce et al. derived an expected utility term, plus a constant multiplies the Shannon entropy as the representation of risky choices, further demonstrating the reasonability of the EU-E decision model. In this paper, we apply the EU-E decision model to s...

Bayesian Updating for General Maxmin Expected Utility Preferences

A characterization of “generalized Bayesian updating” in a maxmin expected utility setting is provided. The key axioms are consequentialism and constant-act dynamic consistency. The latter requires that, if an arbitrary act f is preferred (inferior) to a constant act y conditional upon E, and if f dominates (is dominated by) y pointwise on the complementary event E, then f is unconditionally pr...