ICES Experimental Economics Brown Bag Lecture
Optimal Decision-Making Under Radical Uncertainty: An Experiment
Thursday, November 6, 2025 12:00 PM to 1:00 PM EST
Vernon Smith Hall (formerly Metropolitan Building), Room 5075
The Interdisciplinary Center for Economic Science (ICES) presents an ICES Brown Bag Lecture featuring:
George Mason University
Optimal Decision-Making Under Radical Uncertainty: An Experiment
Abstract
This study explores the best way to build long-term wealth by challenging expected utility theory, which assumes people maximize average outcomes under uncertainty, and compares it to strategies focused on time-average growth in a simulated portfolio task. A between-subjects design varies feedback timing (immediate vs. delayed periodic summaries) and dynamic focus (additive-dominant, multiplicative-dominant, hybrid-dominant). Participants allocate an initial endowment across three assets: a safe one with steady fixed changes, a risky one with volatile percentage shifts, and a balanced one combining both. Partial qualitative details on assets ensure transparency without misleading. An optional risk mitigation tool adds a periodic premium to cap major losses, creating convexity against downside risks. Over multiple periods, measures include allocations, wealth paths, risk aversion, mitigation use, and strategies reported by participants. Hypotheses predict better time-optimal choices with immediate feedback and in multiplicative settings, where mitigation reduces volatility drag for stronger compounding. Benchmarks for expected utility and wealth maximizers guide analysis. This setup clarifies adaptive decisions in non-ergodic finance, providing insights for behavioral economics and portfolio strategies aimed at lasting wealth growth.
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