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Decision Making under Uncertainty when Preference Information is Incomplete

By Benjamin Armbruster and Erick Delage

Abstract

We consider the problem of optimal decision making under uncertainty but assume that the decision maker’s utility function is not completely known. Instead, we consider all the utilities that meet some criteria, such as preferring certain lotteries overcertain other lotteries and being riskaverse,s-shaped, orprudent. Thisextends the notionofstochasticdominance. We then give tractable formulations for such decision making problems. We formulate them as robust utility maximization problems, as optimization problems with stochastic dominance constraints, and as robust certainty equivalent maximization problems. We use a portfolio allocation problem to illustrate our results.

Year: 2012
OAI identifier: oai:CiteSeerX.psu:10.1.1.416.5913
Provided by: CiteSeerX
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