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Rank-Dependent Probabilities

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Author Info
Karni, Edi
Safra, Zvi

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Abstract

Within the framework of expected utility theory with rank-dependent probabilities, the authors present a hypothesis concerning the shape of the probability transformation function. This hypothesis is consistent with the "preference reversals" phenomenon. In particular, it is consistent with the finding (1) that the frequency of reversals is higher when the P-bet is preferred to the corresponding $-bet than when the $-bet is preferred over the corresponding P-bet and (2) that the $-bet is chosen more frequently than the corresponding P-bet. It is also consistent with aversion to fair, symmetric risk and with the simultaneous participation in actuarially unfair lotteries and insurance. Copyright 1990 by Royal Economic Society.

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Publisher Info
Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 100 (1990)
Issue (Month): 401 (June)
Pages: 487-95
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Handle: RePEc:ecj:econjl:v:100:y:1990:i:401:p:487-95

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  1. Kuan Xu & Lars Osberg, 2000. "The Social Welfare Implications, Decomposability, and Geometry of the Sen Family of Poverty Indices," Department of Economics at Dalhousie University working papers archive sendeco, Dalhousie, Department of Economics. [Downloadable!]
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  2. Zvi Safra & Uzi Segal, 2006. "Calibration Results for Non-Expected Utility Theories," Boston College Working Papers in Economics 645, Boston College Department of Economics. [Downloadable!]
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  3. Andreas Pape & Subir Bose & Emre Ozdenoren, 2004. "Optimal auctions with ambiguity," Econometric Society 2004 North American Summer Meetings 609, Econometric Society. [Downloadable!]
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  4. Diecidue, E. & Wakker, P.P., 2000. "On the intuition of rank-dependent utility," Discussion Paper 74, Tilburg University, Center for Economic Research. [Downloadable!]
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  5. Nicolas Treich, 2008. "The Value of a Statistical Life under Ambiguity Aversion," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  6. Nuno Garoupa, 1998. "Crime and Punishment: Further Results," Economics Working Papers 344, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
  7. Uzi Segal, 1986. "Stochastic Dominance for Two-Stage Lotteries," UCLA Economics Working Papers 416, UCLA Department of Economics. [Downloadable!]
  8. Philip R. P. Coelho & James E. McClure, 1996. "Social context and the utility of wealth: Addressing the Markowitz challenge," Working Papers 199602, Ball State University, Department of Economics, revised Jan 1998. [Downloadable!]
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  9. repec:bep:thecon:v:3:y:2003:i:1:p:1074-1074 is not listed on IDEAS
  10. Uzi Segal, 1986. "Some Remarks on Quiggin's Anticipated Utility," UCLA Economics Working Papers 392, UCLA Department of Economics. [Downloadable!]
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  11. Chaim Fershtman & Zvi Safra & Daniel Vincent, 1990. "Delayed Agreements and Non-Expected Utility," Discussion Papers 867, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
    Other versions:
  12. Alaoui, Larbi, 2009. "The value of useless information," MPRA Paper 11411, University Library of Munich, Germany. [Downloadable!]
  13. Zvi Safra & Uzi Segal, 2005. "Are Universal Preferences Possible? Calibration Results for Non-Expected Utility Theories," Boston College Working Papers in Economics 633, Boston College Department of Economics. [Downloadable!]
  14. Kuan Xu & Lars Osberg, 2002. "On Sen's Approach to Poverty Measures and Recent Developments," Department of Economics at Dalhousie University working papers archive sensw, Dalhousie, Department of Economics. [Downloadable!]
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