Robust Decision Making using a Risk-Averse Utility Set∗
نویسندگان
چکیده
Eliciting the utility of a decision maker is difficult. In this paper, we develop a flexible decision making framework, which uses the concept of utility robustness to address the problem of ambiguity and inconsistency in utility assessments. The ideas are developed by giving a probabilistic interpretation to utility and marginal utility functions. Boundary and additional conditions are used to describe a utility set that characterizes a decision maker’s risk attitude. Reformulation and convergence results are given for the discrete and continuous specifications of the utility set. A portfolio investment decision problem is used to illustrate the basic ideas, and demonstrate the usefulness of the proposed decision making framework.
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