A language for the construction of preferences under uncertainty

Marco LiCalzi

Game Theory and Information from University Library of Munich, Germany

Abstract: This paper studies a target-based procedure to rank lotteries that is normatively and observationally equivalent to the expected utility model. In view of this equivalence, the traditional utility-based language for decision making may be substituted with an alternative target-based language. Switching language may have significant modelling consequences. To exemplify, we contrast the utility-based viewpoint of prospect theory against the target-based viewpoint and provide an explanation of Allais’ paradox based on context dependence instead of distorted probabilities.

Keywords: expected utility; prospect theory; target-based decisions; choice anomalies; benchmarking (search for similar items in EconPapers)
JEL-codes: C7 D8 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2005-09-05
New Economics Papers: this item is included in nep-cbe
Note: Type of Document - pdf; pages: 21. 25 pages, pdf
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/game/papers/0509/0509002.pdf (application/pdf)

Related works:
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:wpa:wuwpga:0509002

Access Statistics for this paper

More papers in Game Theory and Information from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ( this e-mail address is bad, please contact ).