On Preference for Simplicity and Probability Weighting

Lasse Mononen
Additional contact information
Lasse Mononen: Center for Mathematical Economics, Bielefeld University

No 748, Center for Mathematical Economics Working Papers from Center for Mathematical Economics, Bielefeld University

Abstract: Complexity aversion is well-documented in choice under risk. One of the main behavioral effects of complexity aversion is the event-splitting effect. This captures the change in the value of a lottery from splitting a prize of the lottery into two separate prizes by halving the probability. We relax the independence axiom for the event-splitting effect. Under continuity assumptions, this characterizes a decision-maker that is either 1) an expected utility maximizer with an entropic cost of complexity or 2) a powerweighted expected utility maximizer that weights probabilities by a power function. Additionally, our model offers preference foundations for the logit random choice.

Pages: 89
Date: 2025-08-18
New Economics Papers: this item is included in nep-dcm, nep-mic and nep-upt
References: Add references at CitEc
Citations:

Downloads: (external link)
https://pub.uni-bielefeld.de/download/3006257/3006258 First Version, 2025 (application/pdf)

Related works:
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: https://EconPapers.repec.org/RePEc:bie:wpaper:748

Access Statistics for this paper

More papers in Center for Mathematical Economics Working Papers from Center for Mathematical Economics, Bielefeld University Contact information at EDIRC.
Bibliographic data for series maintained by Bettina Weingarten ().