Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
957322 | Journal of Economic Theory | 2009 | 17 Pages |
Abstract
This paper provides preference foundations for parametric weighting functions under rank-dependent utility. This is achieved by decomposing the independence axiom of expected utility into separate meaningful properties. These conditions allow us to characterize rank-dependent utility with power and exponential weighting functions. Moreover, by allowing probabilistic risk attitudes to vary within the probability interval, a preference foundation for rank-dependent utility with parametric inverse-S shaped weighting function is obtained.
Related Topics
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Economics and Econometrics
Authors
Enrico Diecidue, Ulrich Schmidt, Horst Zank,