Gains and losses in nonadditive expected utility

Authors
  • S. Rakesh
  • P.P. Wakker
Publication date 1995
Host editors
  • M.J. Machina
  • B.R. Munier
Book title Models and experiments on risk and rationality
ISBN
  • 0792330315
  • 9780792330318
Series Theory and decision library Series B, Mathematical and statistical methods, 09213392
Pages (from-to) 157-172
Number of pages 15
Publisher Dordrecht: Kluwer Academic Publishers
Organisations
  • Faculty of Economics and Business (FEB) - Amsterdam School of Economics Research Institute (ASE-RI)
Abstract This paper provides a simple approach for deriving cumulative prospect theory. The key axiom is a cumulative dominance axiom which requires that a prospect be judged more attractive if in it greater gains are more likely and greater losses are less likely. In the presence of this cumulative dominance, once a model is satisfied on a "sufficiently rich" domain, then it holds everywhere. This leads to highly transparent results.
Document type Chapter
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