Home

Bankruptcy And Expected Utility Maximizatiion

Prajit Kumar Dutta

Title:
Bankruptcy And Expected Utility Maximizatiion
Author(s):
Dutta, Prajit Kumar
Date:
Type:
Working papers
Department:
Economics
Permanent URL:
Series:
Department of Economics Discussion Papers
Part Number:
663
Abstract:
This paper introduces a utility formulation to the well-known gambler's ruin problem. An agent who maximizes lifetime expected utility has to tradeoff short-term utility against longer-term survival prospects. The optimal tradeoff is established by way of characterizing the agents' value and optimal policy functions. Further, the scope of expected utility maximization is examined by contrasting the bankruptcy probabilities of an agent employing such a criterion with those of an agent who is more directly interested in survival. Economic applications of the theory are also discussed.
Subject(s):
Economics
Item views:
249
Metadata:
text | xml

In Partnership with the Center for Digital Research and Scholarship at Columbia University Libraries/Information Services | Terms of Use