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Working Papers

An Evolutionary Perspective on Updating Risk and Ambiguity Preferences
with Philipp Sadowski
December 2019, Updated June 2021

Evolution of preferences refers to the notion that natural selection not only can influence physical traits, but can also shape preferences. Using this approach, we develop a foundation for non-expected-utility and ambiguity-averse preferences and study updating of such preferences in response to information. Evolutionarily optimal preferences will be dynamically consistent, but may violate consequentialism.  [hide synopsis]

Risk Attitude Optimization and Heterogeneous Stock Market Participation
October 2017

This paper uses a special case of mixture-averse preferences (Sarver, 2018) to study equilibrium portfolio choice and asset returns. We solve for the dynamic stochastic general equilibrium of a calibrated economy and show that the model can generate endogenous heterogeneity in equilibrium stock market participation, even for a population of identical consumers.  [hide synopsis]

 

Publications

Naivete about Temptation and Self-Control: Foundations for Recursive Naive Quasi-Hyperbolic Discounting
with David Ahn and Ryota Iijima
Journal of Economic Theory, September 2020  [Published Version]

Behavioral definitions of naivete that can be applied to the Gul-Pesendorfer model of temptation and self-control. Unlike the Strotzian model, the self-control representation is continuous and can be applied recursively. We use our approach to axiomatically characterize recursive naive quasi-hyperbolic discounting.  [hide synopsis]

Behavioral Characterizations of Naivete for Time-Inconsistent Preferences
with David Ahn, Ryota Iijima, Yves Le Yaouanq
Review of Economic Studies, November 2019  [Supplementary Appendix]

Behavioral definitions of naivete and sophistication, and comparative measures of naivete. Think Arrow-Pratt, but for naivete instead of risk aversion. We show that our definitions yield tight parametric restrictions for the random Strotz model of time inconsistency, which includes hyperbolic, quasi-hyperbolic, and random quasi-hyperbolic discounting as special cases.  [hide synopsis]

Dynamic Mixture-Averse Preferences
Econometrica, July 2018  [Supplementary Appendix]

A new recursive utility representation where an individual optimally adjusts her risk attitude in response to the uncertainty that she faces. The key axiom is a dynamic form of aversion to mixtures of lotteries. The model permits the disutility from marginal increases in risk to decrease with exposure, and we demonstrate the usefulness of this novel feature in applications to insurance demand, portfolio choice, and the Rabin paradox.  [hide synopsis]

Hidden Actions and Preferences for Timing of Resolution of Uncertainty
with Haluk Ergin
Theoretical Economics, May 2015

Extending the analysis of intrinsic preference for timing of information from Kreps-Porteus to include preference for flexibility, we show that this broad class of dynamic preferences can be represented as if the decision maker takes an interim action that is not observable to the analyst. Novel special cases are considered, including unobserved information acquisition.  [hide synopsis]

Preference for Flexibility and Random Choice
with David Ahn
Econometrica, January 2013  [Supplementary Appendix]

Preferences over option sets and random choice from option sets can both be represented using random utility models. Our model simultaneously considers both pieces of choice data, provides an axiom that ensures consistency of behavior across the two domains, and shows that this combined data can be used to identify both utility and beliefs.  [hide synopsis]

The Unique Minimal Dual Representation of a Convex Function
with Haluk Ergin
Journal of Mathematical Analysis and Applications, October 2010  [Published Version]

Fenchel-Moreau duality allows a convex function to be expressed as the supremum of a set of linear functions minus the conjugate (the “intercept”). Under suitable assumptions on the domain, we show that any locally Lipschitz continuous function has a unique minimal closed set of linear functions for which this duality holds.  [hide synopsis]

A Unique Costly Contemplation Representation
with Haluk Ergin
Econometrica, July 2010  [Supplementary Appendix]

Individuals are often uncertain of their tastes (utility) over available alternatives when making choices, but may be able to engage in contemplation to improve their decisions. We model such behavior and analyze it axiomatically. Our key axiom, aversion to contingent planning, captures the idea that since contemplation is costly, individuals will prefer to economize on cognitive resources by avoiding unnecessary planning.  [hide synopsis]

Anticipating Regret: Why Fewer Options May Be Better
Econometrica, March 2008  [Lead Article]

Individuals may experience regret if their choices end up being inferior to other available alternatives. Larger choice sets therefore come with both benefits and costs: Adding an option that is known to be better than anything currently available will clearly benefit an individual. However, adding options that are not expected to be better at the time of choice, but that might ultimately prove superior, opens the individual up to regret.  [hide synopsis]

Representing Preferences with a Unique Subjective State Space: A Corrigendum
with Eddie Dekel, Barton L. Lipman, and Aldo Rustichini
Econometrica, March 2007  [Supplementary Appendix]

Correction of Dekel, Lipman, and Rustichini (2001). Check out the supplementary appendix for a complete proof of DLR’s additive expected-utility representation theorem.  [hide synopsis]

Correlated Equilibrium in Evolutionary Models with Subpopulations
with Justin Lenzo
Games and Economic Behavior, August 2006  [Published Version]

Classic results in evolutionary game theory draw a connection between limit states in the replicator dynamics and Nash equilibrium. In a setting where individuals are divided into subpopulations, with correlation in how these subpopulations are matched for play, we provide a similar foundation to correlated equilibrium.  [hide synopsis]

Contact

Email: todd.sarver@duke.edu

Office: 232 Social Sciences

Mail: Department of Economics
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