Parametric weighting functions

Enrico Diecidue, Ulrich Schmidt and Horst Zank

Journal of Economic Theory, 2009, vol. 144, issue 3, pages 1102-1118

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.

Keywords: Comonotonic; independence; Probability; weighting; function; Preference; foundation; Rank-dependent; utility (search for similar items in EconPapers)
Date: 2009
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Persistent link: http://EconPapers.repec.org/RePEc:eee:jetheo:v:144:y:2009:i:3:p:1102-1118

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