Forbidden zones for the expectation of a random variable. New version 1

Alexander Harin

MPRA Paper from University Library of Munich, Germany

Abstract: A forbidden zones theorem is deduced in the present article. Its consequences and applications are preliminary considered. The following statement is proven: if some non-zero lower bound exists for the variance of a random variable, that takes on values in a finite interval, then non-zero bounds or forbidden zones exist for its expectation near the boundaries of the interval. The article is motivated by the need of rigorous theoretical support for the practical analysis that has been performed for the influence of scattering and noise in the behavioral economics, decision sciences, utility and prospect theories. If a noise can be one of possible causes of the above lower bound on the variance, then it can cause or broaden out such forbidden zones. So the theorem can provide new possibilities for mathematical description of the influence of such a noise. The considered forbidden zones can evidently lead to some biases in measurements.

Keywords: probability; variance; noise; utility theory; prospect theory; behavioral economics; decision sciences; measurement (search for similar items in EconPapers)
JEL-codes: C02 C1 D8 D81 (search for similar items in EconPapers)
Date: 2018-01-29
New Economics Papers: this item is included in nep-ecm and nep-upt
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