 Risk Perception, Risk Attitude, and Decision: A Rank-Dependent AnalysisMathematical Population Studies, 2015, vol. 22, issue 1, 53-70 Abstract: The classical expected utility model of decision under risk has been criticized from an experimental point of view (Allais' paradox) as well as for its restrictive lack of explanatory power. The Rank-Dependent Expected Utility model answers some of these criticisms. The decision maker is characterized by two functions: a utility function on consequences measuring preferences over sure outcomes and a probability weighting function measuring the subjective weighting of probabilities. The model allows for more diversified types of behavior: it is consistent with the behavior revealed by the Allais paradox; the decision maker could dislike risk (prefer its expectation to any lottery) without necessarily avoiding any increase in risk; diminishing marginal utility may coexist with "weak" risk-seeking attitudes; decision makers with the same utility function may differ in their choices between lotteries when they have different probability weighting functions; furthermore, the same decision maker may have different, context-dependent, subjective beliefs on events. Date: 2015 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:mpopst:v:22:y:2015:i:1:p:53-70 Ordering information: This journal article can be ordered from DOI: 10.1080/08898480.2013.836425 Access Statistics for this article Mathematical Population Studies is currently edited by Prof. Noel Bonneuil, Annick Lesne, Tomasz Zadlo, Malay Ghosh and Ezio Venturino More articles in Mathematical Population Studies from Taylor & Francis Journals |
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