Motivated by the energy domain, we examine a risk-averse buyer that has to purchase a fixed quantity of a continuous good. The buyer has two opportunities to buy: now or later. The buyer can spread the quantity over the two timeslots in any way, as long as the total quantity remains the same. The current price is known, but the future price is not. It is well known that risk neutral buyers purchase in whichever timeslot they expect to be the cheapest, regardless of the uncertainty of the future price. Research suggests, however, that most people may in fact be risk-averse. If the expected future price is lower than the current price, but very uncertain, then they may purchase in the present, or spread the quantity over both timeslots. We describe a formal model with a uniform price distribution and a two-segment piecewise linear risk aversion function. We provide a theorem that states the optimal decision as a closed-form expression.

Original languageEnglish
Title of host publicationProceedings of the 14th International Conference on Autonomous Agents and Multiagent Systems, AAMAS 2015
Place of PublicationRichland, SC
PublisherInternational Foundation for Autonomous Agents and Multiagent Systems (IFAAMAS)
Number of pages2
ISBN (Electronic)978-1-4503-3771-7
ISBN (Print)978-1-4503-3413-6
StatePublished - 2015
EventAAMAS 2015 - Istanbul, Turkey
Duration: 4 May 20158 May 2015
Conference number: 14


ConferenceAAMAS 2015

    Research areas

  • Energy, Optimization, Price uncertainty, Risk aversion, Utility

ID: 30557901