On the necessity of using lottery qualities

Yves Alarie and Georges Dionne ()
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Yves Alarie: HEC Montreal, Canada Research Chair in Risk Management

No 04-3, Working Papers from HEC Montreal, Canada Research Chair in Risk Management

Abstract: The aim of this paper is to propose a model of decision–making for lotteries. The key element of the theory is the use of lottery qualities. Qualities allow the derivation of optimal decision-making processes and are taken explicitly into account for lottery evaluation. Our contribution explains the major violations of the expected utility theory for decisions on two–point lotteries and shows the necessity of giving explicit consideration to the lottery qualities.

Keywords: Lottery choice; common ratio; preference reversal; pricing; lottery test; cognitive process; certainty equivalent; lottery quality (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2004-06-01
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Related works:
Working Paper: On the Necessity of Using Lottery Qualities (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:crcrmw:2004_003

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