Risk aversion in expected intertemporal discounted utilities bandit problems

Abstract

Risk aversion, Bandit problem, Expected utility,

A Note on Optimal Experimentation Under Risk Aversion

“…The counterintuitive part (b) of Proposition 1 is seemingly at odds with the result of Chancelier et al (2009), who conclude that more risk-averse DMs are always more likely to pull the safe arm in bandit problems. Closer inspection of Theorem 1 in Chancelier et al (2009), however, reveals that the assumption made there restricts payoffs in such a way that it only covers case (a) of our Proposition 1. 10 There, we obtain the same result.…”

“…10 To see this, note that Theorem 1 of Chancelier et al (2009) can be rewritten in our notation/model as: "Assume that there exists a concave increasing function ϕ :…”

“…At first sight, it seems intuitive that decision makers who are more risk averse will be less willing to take the risky action. Indeed, an earlier paper (Chancelier et al, 2009) arrives at such a conclusion. Below, we however show that there exists a previously overlooked part of the parameter space where this result is overturned.…”

Risk-Averse Allocation Indices for Multiarmed Bandit Problem

“…This problem is of interest from both applied and theoretical viewpoints. The reader is referred to [5], [18], and [19] for some interesting applications of one-armed bandit problem.…”