Distorted Probabilities And Choice Under Risk Clemens Puppe

ISBN: 9780387542478

Published: August 1st 1991

Paperback

100 pages


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Distorted Probabilities And Choice Under Risk  by  Clemens Puppe

Distorted Probabilities And Choice Under Risk by Clemens Puppe
August 1st 1991 | Paperback | PDF, EPUB, FB2, DjVu, AUDIO, mp3, RTF | 100 pages | ISBN: 9780387542478 | 3.60 Mb

This book provides a systematic, formal treatment of a recently proposed extension of the expected utility model of choice under risk: the so-called rank-dependent utility model. In this approach the representation of preferences is based upon aMoreThis book provides a systematic, formal treatment of a recently proposed extension of the expected utility model of choice under risk: the so-called rank-dependent utility model. In this approach the representation of preferences is based upon a (generalized) utility function defined on the outcome/probability-plane. The main purpose of the book is to demonstrate the flexibility of this model with respect to its explanatory power.

This is achieved by analyzing a certain subclass of the rank-dependent utility approach which incorporates the notion of price-dependent distortions of probabilities. This particular approach captures an optimistic point of view towards gambling (as can often be observed), whilst being compatible with a suitably formulated concept of risk aversion.

The resulting model is used to explain some of the observed behavioral patterns as the Allais-paradox and the behavior described by the Friedman-Savage hypothesis.



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