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Payoff Kinks in Preferences over Lotteries Author info | Abstract | Publisher info | Download info | Related research | Statistics Mark J. Machina
This paper identifies two distinct types of payoff kinks that can be exhibited by preference functions over monetary lotteries - "locally separable" vs. "locally nonseparable" - and illustrates their relationship to the payoff and probability derivatives of such functions. Expected utility and FrŽchet differentiable preference functions are found to be incapable of exhibiting locally nonseparable payoff kinks; rank-dependent preference functions are incapable of avoiding them.
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Paper provided by Department of Economics, UC San Diego in its series University of California at San Diego, Economics Working Paper Series with number
2000-22.
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Date of creation: Sep 2000Date of revision:
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Sujoy Mukerji & Jean-Marc Tallon, 2002.
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Zvi Safra & Uzi Segal, 2001.
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511, Boston College Department of Economics.
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