Notes—Discovering Personal Probabilities When Utility Functions are Unknown

Learning in optimal screening problem when utility functions are unknown

Optimal screening is one of the basic models of contracting under incomplete information, and we study the problem in a quality pricing application. We present a numerical method for solving the pricing problem when the firm is uncertain about the buyers’ utility functions. In the method, the firm learns the optimal price schedule online as the demand data is collected. We examine what the firm...

Learning and Making Decisions When Costs and Probabilities are Both Unknown

Learning and Making Decisions When Costs and Probabilities are Both Unknown

Duality Between Maximization of Expected Utility and Minimization of Relative Entropy When Probabilities are Imprecise

In this paper we model the problem faced by a riskaverse decision maker with a precise subjective probability distribution who bets against a risk-neutral opponent or invests in a financial market where the beliefs of the opponent or the representative agent in the market are described by a convex set of imprecise probabilities. The problem of finding the portfolio of bets or investments that m...

Aggregation Functions and Personal Utility Functions in General Insurance

The modeling of a utility function’s forms is a very interesting part of modern decision making theory. We apply a basic concept of the personal utility theory on determination of minimal net and maximal gross annual premium in general insurance. We introduce specific values of gross annual premium on the basis of a personal utility function, which is determined empirically by a short personal ...