Advanced Search
MyIDEAS: Login to save this paper or follow this series

The Utility Function Under Prospect Theory

Contents:

Author Info

  • Ali al-Nowaihi

    ()

  • Ian Bradley

    ()

  • Sanjit Dhami

    ()

Abstract

Prospect theory is the main behavioral alternative to expected utility. Tversky and Kahnemann (1992) motivate the utility function for gains and losses under prospect theory by using the axiom of preference homogeneity. However, they do not provide the formal proof. We provide the relevant proof. Furthermore, we show that the utility function under preference homogeneity obeys an additional and important restriction that is not noted by Tversky and Kahnemann (1992). This simplifies the use of prospect theory by reducing the number of free parameters by one.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.le.ac.uk/economics/research/RePEc/lec/leecon/dp06-15.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 06/15.

as in new window
Length:
Date of creation: Nov 2006
Date of revision:
Handle: RePEc:lec:leecon:06/15

Contact details of provider:
Postal: Department of Economics University of Leicester, University Road. Leicester. LE1 7RH. UK
Phone: +44 (0)116 252 2887
Fax: +44 (0)116 252 2908
Email:
Web page: http://www2.le.ac.uk/departments/economics
More information through EDIRC

Order Information:
Email:
Web: http://www2.le.ac.uk/departments/economics/research/discussion-papers

Related research

Keywords: Prospect Theory; Preference homogeneity; Functional equations;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Ali al-Nowaihi & Sanjit Dhami, 2005. "Insurance and Probability Weighting Functions," Discussion Papers in Economics 05/19, Department of Economics, University of Leicester, revised Sep 2006.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Antonio Nicita & Matteo Rizzolli, 2013. "In Dubio Pro Reo. Behavioral explanations of pro-defendant bias in procedures," BEMPS - Bozen Economics & Management Paper Series BEMPS04, School of Economics and Management at the Free University of Bozen.
  2. Dhami, Sanjit & al-Nowaihi, Ali, 2013. "An extension of the Becker proposition to non-expected utility theory," Mathematical Social Sciences, Elsevier, vol. 65(1), pages 10-20.
  3. Ali al-Nowaihi & Sanjit Dhami, 2010. "Composite Prospect Theory: A proposal to combine ‘prospect theory’ and ‘cumulative prospect theory’," Discussion Papers in Economics 10/11, Department of Economics, University of Leicester.
  4. Ali al-Nowaihi & Sanjit Dhami, 2010. "The Behavioral Economics of Insurance," Discussion Papers in Economics 10/12, Department of Economics, University of Leicester, revised Apr 2010.
  5. Ali al-Nowaihi & Sanjit Dhami, 2010. "Probability Weighting Functions," Discussion Papers in Economics 10/10, Department of Economics, University of Leicester.
  6. Sanjit Dhami & Ali al-Nowaihi, 2010. "The Behavioral Economics of Crime and Punishment," Discussion Papers in Economics 10/14, Department of Economics, University of Leicester, revised Jul 2010.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:lec:leecon:06/15. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mrs. Alexandra Mazzuoccolo).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.