The OLG model of Allais and Samuelson retains the methodological assumptions of agent optimization and market clearing from the Arrow–Debreu model, yet its equilibrium set has different properties: Pareto inefficiency, multiplicity, positive valuation of money, and a golden rule equilibrium in which the rate of interest is equal to population growth (independent of impatience). These properties...

The OLG model of Allais and Samuelson retains the methodological assumptions of agent optimization and market clearing from the Arrow-Debreu model, yet its equilibrium set has different properties: Pareto inefficiency, indeterminacy, positive valuation of money, and a golden rule equilibrium in which the rate of interest is equal to population growth (independent of impatience). These propertie...

This chapter of a collective book aims at presenting cardinal extensions of the EU model, based on the Choquet integral, which allow to take into account observed behaviors as in Allais’ paradox under risk or Ellsberg’s paradox under uncertainty, where the expected utility model is violated. Under a key axiom, the comonotonic independence axiom,Schmeidler under uncertainty, and Quiggin and Yaar...

A unified parameterization of an expected utility model corrected for regret and disappointment effects is presented, constrained to conform to a wellknown choice pattern, the common consequence effect, a special case of the Allais paradox. For choices subject to regret and disappointment effects to be consistent with this choice pattern, the function that corrects the utility of the obtained o...

Using an ordinal approach to utility, in the spirit of Hicks (1962, 1967a), it is possible to greatly simplify the theory of asset prices. The basic assumption is to summarize any probability distribution into its moments so that preferences over distributions can be mapped into preferences over vectors of moments. This implies that assets, like Lancaster’s (1966) consumption goods, are bundles...

In this paper, we develop a novel formalization of Fuzzy Trace Theory (FTT), a leading theory of qualitative risky decision-making. Our model is the first to explicitly formalize and integrate the concepts of gist and the gist hierarchy. Domain knowledge constrains the space of possible decision problems, explaining which gists are chosen in which contexts. We test our model against risky-choic...

We propose a new decision criterion under risk in which people extract both utility from anticipatory feelings ex ante and disutility from disappointment ex post. The decision maker chooses his degree of optimism, given that more optimism raises both the utility of ex ante feelings and the risk of disappointment ex post. We characterize the optimal beliefs and the preferences under risk generat...

Recent experimental studies have focused on fitting parameterized functional forms to cumulative prospect theory's weighting function. This paper examines the behavioral implications of the functional forms and the estimated parameters. We find that none of the parameterizations can simultaneously account for gambling on unlikely gains and the Allais paradox behavior or other strong choice patt...

Most work in game theory is conducted under the assumption that the players are expected utility maximizers. Expected utility is a very tractable decision model, but is prone to wellknown paradoxes and empirical violations (Allais 1953, Ellsberg 1961), which may induce biases in game-theoretic predictions. La Mura (2009) introduced a projective generalization of expected utility (PEU) which avo...

This paper argues that any speci...c utility or disutility for gambling must be excluded from expected utility because such a theory is consequential while a pleasure or displeasure for gambling is a matter of process, not of consequences. A (dis)utility for gambling is modeled as a process utility which monotonically combines with expected utility restricted to consequences. This allows for a ...