Abstract:We study cautious stochastic choice (CSC) agents facing optimal timing decisions in a dynamic setting. In an expected utility setting, the optimal strategy is always a threshold strategy—to stop/sell the first time the price process exits an interval. In contrast, we show that in the CSC setting, where the agent has a family of utility functions and is concerned with the worst case certainty equivalent, the optimal strategy may be of non-threshold form and may involve randomization. We provide some carefully c… Show more
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