Rank-Dependent Probabilities

Edi Karni and Zvi Safra

Economic Journal, 1990, vol. 100, issue 401, 487-95

Abstract: Within the framework of expected utility theory with rank-dependent probabilities, the authors present a hypothesis concerning the shape of the probability transformation function. This hypothesis is consistent with the "preference reversals" phenomenon. In particular, it is consistent with the finding (1) that the frequency of reversals is higher when the P-bet is preferred to the corresponding $-bet than when the $-bet is preferred over the corresponding P-bet and (2) that the $-bet is chosen more frequently than the corresponding P-bet. It is also consistent with aversion to fair, symmetric risk and with the simultaneous participation in actuarially unfair lotteries and insurance. Copyright 1990 by Royal Economic Society.

Date: 1990
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://links.jstor.org/sici?sici=0013-0133%2819900 ... 0.CO%3B2-7&origin=bc full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
Working Paper: RANK-DEPENDENT PROBABILITIES (1988)
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:ecj:econjl:v:100:y:1990:i:401:p:487-95

Ordering information: This journal article can be ordered from
http://www.blackwell ... al.asp?ref=0013-0133

Access Statistics for this article

Economic Journal is currently edited by Martin Cripps, Steve Machin, Woulter den Haan, Andrea Galeotti, Rachel Griffith and Frederic Vermeulen

More articles in Economic Journal from Royal Economic Society Contact information at EDIRC.
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing () and Christopher F. Baum ().