Uncertainty and robustness of surplus extraction

Genericity and Robustness of Full Surplus Extraction

Subtle price discrimination and surplus extraction under uncertainty

This paper provides a solution to Proebsting’s Paradox, an argument that appears to show that the investment rule known as the Kelly criterion can lead a decision maker to invest a higher fraction of his wealth the more unfavorable the odds he faces are and, as a consequence, risk an arbitrarily high proportion of hiswealth on the outcome of a single event. The paper shows that a large class of...

Robustness-based portfolio optimization under epistemic uncertainty

In this paper, we propose formulations and algorithms for robust portfolio optimization under both aleatory uncertainty (i.e., natural variability) and epistemic uncertainty (i.e., imprecise probabilistic information) arising from interval data. Epistemic uncertainty is represented using two approaches: (1) moment bounding approach and (2) likelihood-based approach. This paper first proposes a ...

Information acquisition and full surplus extraction

It is well-known that when agents’ types are correlated, the mechanism designer can extract the entire surplus. This creates an incentive for agents to acquire information about other agents’ types. Robust lotteries (are payment schemes that) support full extraction and partially robust lotteries support efficient implementation in the presence of information acquisition opportunities. Necessar...

Robustness and Uncertainty AversionLars

This paper connects robust control theory to the max-min expected utility model of uncertainty aversion. Max-min expected utility theory depicts preferences using multiple prior distributions. Robust control theory regards a unique controlled stochastic process as an approximation by introducing a set of perturbations to it. We link the two approaches by interpreting the perturbations in robust...