Perturbed Utility Functionals: A Functional-Analytic Framework for Adaptive Decision-Making

We propose a functional-analytic framework for modeling bounded rationality by introducing \emph{perturbed utility functionals}. By extending classical expected utility with a structured perturbation term, we capture behavioral deviations such as loss aversion and risk sensitivity while maintaining analytical tractability. We establish fundamental existence results and demonstrate the consistency of our framework by proving convergence to classical models in the limit of vanishing bias. Through numerical simulations, we illustrate two key findings: (i) in portfolio optimization, our framework captures non-linear "regime shifts" in risk appetite, and (ii) in sequential decision-making, it generates "emergent cautiousness," allowing AI agents to navigate safely around high-risk states. This framework unifies descriptive behavioral insights with prescriptive optimization, offering a scalable pathway for integrating human-like heuristics into AI safety and control systems.

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Publication Details

Journal
Zenodo (CERN European Organization for Nuclear Research)
Published
2026-05-16
DOI
https://doi.org/10.5281/zenodo.20229928
Primary Topic
Risk and Portfolio Optimization
Type
article
Field-Weighted Citation Impact
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article

Perturbed Utility Functionals: A Functional-Analytic Framework for Adaptive Decision-Making

Kunal Tiwari Kunal Tiwari
Zenodo (CERN European Organization for Nuclear Research)
Risk and Portfolio Optimization
article

Perturbed Utility Functionals: A Functional-Analytic Framework for Adaptive Decision-Making

Kunal Tiwari Kunal Tiwari
article en

Abstract

We propose a functional-analytic framework for modeling bounded rationality by introducing \emph{perturbed utility functionals}. By extending classical expected utility with a structured perturbation term, we capture behavioral deviations such as loss aversion and risk sensitivity while maintaining analytical tractability. We establish fundamental existence results and demonstrate the consistency of our framework by proving convergence to classical models in the limit of vanishing bias. Through numerical simulations, we illustrate two key findings: (i) in portfolio optimization, our framework captures non-linear "regime shifts" in risk appetite, and (ii) in sequential decision-making, it generates "emergent cautiousness," allowing AI agents to navigate safely around high-risk states. This framework unifies descriptive behavioral insights with prescriptive optimization, offering a scalable pathway for integrating human-like heuristics into AI safety and control systems.

Zenodo (CERN European Organization for Nuclear Research)
Indira Gandhi National Open University (IN)
Peace, Justice and strong institutions
Openalex Percentile: Top 3%
Risk and Portfolio Optimization
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Perturbed Utility Functionals: A Functional-Analytic Framework for Adaptive Decision-Making — Kunal Tiwari Kunal Tiwari · Zenodo (CERN European Organization for Nuclear Research) (2026) | TGRS Research Map | TGRS