Title: Utility-based model selection and model averaging
Authors: Jan Vecer - Charles University, MFF (Czech Republic) [presenting]
Robert Navratil - Charles University, Faculty of Mathematics and Physics (Czech Republic)
Abstract: A novel approach is presented to model selection and model averaging based on economic theory. Model prediction is studied in the form of a distributional opinion about a random variable $X$. We show how to test this prediction against alternative views. Different model opinions can be traded on a hypothetical market that trades their differences. Using a utility maximization technique, we describe such a market for any general random variable $X$ and any utility function $U$. We specify the optimal behavior of agents and the total market that aggregates all available opinions and show that a correct distributional opinion realizes profit in expectation against any other opinion, giving a novel technique for model selection. Analytical solutions are available for random variables from the exponential family. We determine the distribution corresponding to the aggregated view of all available opinions, giving a novel technique for model averaging.