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A note on the utility function under prospect theory

Ali al-Nowaihi (), Ian Bradley and Sanjit Dhami ()

Economics Letters, 2008, vol. 99, issue 2, 337-339

Abstract: We show that preference-homogeneity and loss-aversion are necessary and sufficient for the value function to have the power form with identical powers for gains and losses and for the probability weighting functions for gains and losses to be identical.

Date: 2008
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Handle: RePEc:eee:ecolet:v:99:y:2008:i:2:p:337-339