Decision Making Under Uncertainty When Preference Information Is Incomplete

Benjamin Armbruster, Erick Delage
2015 Management science  
W e 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 over other lotteries and being risk averse, S-shaped, or prudent. These criteria extend the ones used in the first-and second-order stochastic dominance framework. We then give tractable formulations for such decision-making problems. We formulate
more » ... ems. 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.
doi:10.1287/mnsc.2014.2059 fatcat:b4cah5qtpzelfpq4bz62ki2zum