Distorted Probabilities and Choice under Risk
During the development of modern probability theory in the 17th cen tury it was commonly held that the attractiveness of a gamble offering the payoffs :1:17 ••• ,:l: with probabilities Pl, . . . , Pn is given by its expected n value L:~ :l:iPi. Accordingly, the decision problem of choosing among di...
| Main Author: | |
|---|---|
| Format: | eBook |
| Language: | English |
| Published: |
Berlin, Heidelberg
Springer Berlin Heidelberg
1991, 1991
|
| Edition: | 1st ed. 1991 |
| Series: | Lecture Notes in Economics and Mathematical Systems
|
| Subjects: | |
| Online Access: | |
| Collection: | Springer Book Archives -2004 - Collection details see MPG.ReNa |
Table of Contents:
- 1 Axiomatic Utility Theory under Risk
- 1.1 Historical Overview
- 1.2 The Axiomatic Basis of Expected Utility Theory
- 1.3 The Empirical Evidence against the Independence Axiom
- 1.4 Non-Linear Utility Theory under Risk
- 2 A Rank-Dependent Utility Model with Prize-Dependent Distortion of Probabilities
- 2.1 Rank-Dependent Utility Theory Reconsidered
- 2.2 Homogeneity on Elementary Lotteries
- 2.3 Further Evidence for Prize-Dependent Distortions of Probabilities
- 2.4 A Characterization Theorem
- 2.5 Rank-Dependent Utility Theory and Relative Utility
- 2.6 A Generalized Model
- 3 Risk Aversion
- 3.1 Risk Aversion in the General Rank-Dependent Utility Model
- 3.2 Risk Aversion and Homogeneity
- 3.3 Decreasing Risk Aversion
- 3.4 The Friedman-Savage Hypothesis
- Conclusion
- References