NON-EXPECTED UTILITY THEORIES: WEIGHTED EXPECTED, RANK DEPENDENT, AND CUMULATIVE PROSPECT THEORY UTILITY

Jonathan W. Tuthill and Darren L. Frechette

No 19073, 2002 Conference, April 22-23, 2002, St. Louis, Missouri from NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management

Abstract: This paper discusses some of the failings of expected utility including the Allais paradox and expected utility's inadequate one dimensional characterization of risk. Three alternatives to expected utility are discussed at length; weighted expected utility, rank dependent utility, and cumulative prospect theory. Each alternative is capable of explaining Allais paradox type problems and permits more sophisticated multi dimensional risk preferences.

Keywords: Risk; and; Uncertainty (search for similar items in EconPapers)
Pages: 24
Date: 2002
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:ncrtwo:19073

DOI: 10.22004/ag.econ.19073

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