Affective decision making under uncertainty. Risk, ambiguity and black swans (Q2247184)

The book investigates the concept of affective decision making under uncertainty. Especially the role of ambiguity in decision-making under uncertainty is investigated. After having outlined ideas of affective moods in Part I, the author devotes his attention in Part II to market equilibrium at markets with risky and ambiguous assets. Part II is divided into 4 chapters. The first chapter analyzes portfolio decisions under risk and ambiguity, the rationality of the decisions is studied. Approximation theorems, which make possible to approximate Afriat NP-hard systems of inequalities by linear systems of inequalities are derived and affective utility functions are introduced. Affective portfolio theory under ambiguity and risk is characterized as ``decision process, where investors maximize affective expected utility, using affective probabilities. These probabilities differ from objective or subjective probabilities, since they may depend on affective outcomes in different states of the world.''. Both smooth and non-smooth affective portfolio theory is considered. The further two chapters consider approximate solutions based on approximation theorems of equilibrium inequalities under various conditions. Chapter 2 studies dual Walrasian equilibrium inequalities and Gorman polar form equilibrium inequalities. Chapter 3 deals with approximate solutions of Walrasian equilibrium inequalities under the condition of uniformly bounded marginal utilities of income. Chapter 4 studies the complexity of the Walrasian equilibrium inequalities. A polynomial-time algorithm for computing an approximate solution of the Walrasian equilibrium inequalities is proposed.