Fluctuation theorems and expected utility hypothesis

TL;DR

This paper explores how fluctuation theorems relate to the expected utility hypothesis, proposing entropy as a potential guide for decision-making under uncertainty and analyzing its impact on certainty equivalents.

Contribution

It introduces a bound involving certainty equivalents and entropy, linking thermodynamic concepts with economic decision theory in novel ways.

Findings

Established a bound involving certainty equivalent and entropy.

Analyzed the dependence of certainty equivalent on entropy in specific scenarios.

Connected fluctuation theorems with economic utility concepts.

Abstract

The expected utility hypothesis is a popular concept in economics that is useful for making decisions when the payoff is uncertain. In this paper, we investigate the implications of a fluctuation theorem in the theory of expected utility. In particular, we wonder whether entropy could serve as a guideline for gambling. We prove the existence of a bound involving the certainty equivalent which depends on the entropy produced. Then, we examine the dependence of the certainty equivalent on the entropy by looking at specific situations, in particular the work extraction from a nonequilibrium initial state.