Parametric weighting functions

Enrico Diecidue, Ulrich Schmidt and Horst Zank

No 1395, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: This paper provides preference foundations for parametric weighting functions under rankdependent utility. This is achieved by decomposing the independence axiom of expected utility into separate meaningful properties. These conditions allow us to characterize rank-dependent utility with power and exponential weighting functions. Moreover, by allowing probabilistic risk attitudes to vary within the probability interval, a preference foundation for rank-dependent utility with parametric inverse-S shaped weighting function is obtained.

Keywords: Probability weighting function; Preference foundation; Rank-dependent utility; Comonotonic independence (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Parametric weighting functions (2009)
Working Paper: Parametric Weighting Functions (2007)
Working Paper: Parametric Weighting Functions (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1395

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