Now, Later, or Both: A Closed-Form Optimal Decision for a Risk-Averse Buyer

Jasper Hoogland*, Mathijs de Weerdt, Han La Poutré

*Corresponding author for this work

Research output: Chapter in Book/Conference proceedings/Edited volumeConference contributionScientificpeer-review


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 future price is expected to be lower than the current price, but very uncertain, then they may prefer to purchase in the present, or spread the quantity over both timeslots. We describe a formal model with a uniform price distribution and a piecewise linear risk aversion function.We provide a theorem that states the optimal behavior as a closed-form expression, and we give a proof of this theorem.

Original languageEnglish
Title of host publicationAgent-Mediated Electronic Commerce. Designing Trading Strategies and Mechanisms for Electronic Markets
Subtitle of host publicationAMEC/TADA 2015, Istanbul, Turkey, May 4, 2015, and AMEC/TADA 2016, New York, NY, USA, July 10, 2016, Revised Selected Papers
EditorsS. Ceppi, E. David, C. Hajaj, V. Robu, I.A. Vetsikas
PublisherSpringer Science
Number of pages15
ISBN (Electronic)978-3-319-54229-4
ISBN (Print)978-3-319-54228-7
Publication statusPublished - 2017

Publication series

NameLecture Notes in Business Information Processing
ISSN (Print)1865-1348

Bibliographical note

This book constitutes revised selected papers from the 17th and 18th International Workshop on Agent-Mediated Electronic Commerce, AMEC TADA 2015 and 2016, which took place in Istanbul, Turkey, in May 2015, and in New York City, USA, in July 2016.


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