Non-Expected Utility Theories: Weighted Expected, Rank Dependent, And Cumulative Prospect Theory Utility
AbstractThis 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.
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Bibliographic InfoPaper provided by NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management in its series 2002 Conference, April 22-23, 2002, St. Louis, Missouri with number 19073.
Date of creation: 2002
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Web page: http://www.agebb.missouri.edu/ncrext/ncr134/
Risk and Uncertainty;
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