We build a satisficing model of probabilistic choice under risk which embeds Expected Utility Theory (EUT) into a boundedly rational deliberation process. The decision maker accumulates evidence for and against alternative options by repeatedly sampling from her underlying set of EU preferences...

Two well-known violations of Expected Utility Theory (EUT) are the Allais Paradox and the preference reversal between gamble choices and gamble bids. The Allais Paradox undermines the independence axiom, according to which the preferences for two gambles should be unaffected by an independent...

Means-tested pension policies are typical for many countries and are very important to the pension system. These policies are specific for each country, and the assessment of policy changes is critical for policy makers. In this paper we consider the Australian means-tested Age Pension. The...

Nearly all life-cycle models adopt Yaari's (1965) assumption that individuals know the survival probabilities that they face. Given that an individual's exact survival probabilities are likely unknown, we explore the implications of relaxing this assumption. If there is no annuity market, then...

Most portfolio selection rules based on the sample mean and covariance matrix perform poorly out-of-sample. Moreover, there is a growing body of evidence that such optimization rules are not able to beat simple rules of thumb, such as 1/N. Parameter uncertainty has been identified as one major...

In this paper, we explore approximate solutions to optimal control problems that cannot be solved analytically with existing techniques. Inspired by the mean-variance analysis of the single period environment, an advanced and a simple method are developed in order to approximate optimal...

We present a decision theory which models and axiomatizes a decision-making procedure. This procedure involves two steps: in the first step, for each action, some specific event which can bring about a relatively high outcome with a relatively high probability or a relatively low outcome with a...

Rabin and Thaler (2001) declared Expected Utility an ex-hypothesis or a dead parrot alluding to the famous sketch from Monthy Pythons Flying Circus. Following Cox and Sadiraj (2006) and others, one should distinguish between Expected Utility (EU) theory (a purely mathematical theory based on...