Parametric Weighting Functions

Enrico Diecidue, Ulrich Schmidt and Horst Zank

Kiel Working Papers from Kiel Institute for the World Economy

Abstract: This paper provides preference foundations for parametric weighting functions under rankdependent 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)
JEL-codes: D81 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-upt
Date: 2008-01
View list of references

Downloads: (external link)
http://www.ifw-members.ifw-kiel.de/publications/pa ... unctions/kap1395.pdf (application/pdf)

Related works:
Working Paper: Parametric Weighting Functions (2006)
Working Paper: Parametric Weighting Functions (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:kie:kieliw:1395

Access Statistics for this paper

More papers in Kiel Working Papers from Kiel Institute for the World Economy
Series data maintained by Dieter Stribny ().