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Transforming Ordinal Riskless Utility into Cardinal Risky Utility: A Comment on Chung, Glimcher, and Tymula (2019)

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  • Peter P. Wakker

Abstract

Chung, Glimcher, and Tymula (2019) observed both consumers' choices over commodity bundles and choices under risk. They assumed a cardinal riskless utility function V representing consumer choices and a cardinal risky utility function U. The two were inconsistent. This note shows that the two functions can be reconciled if we assume that V is ordinal. Then one utility function U can accommodate both risky and riskless choices.

Suggested Citation

  • Peter P. Wakker, 2022. "Transforming Ordinal Riskless Utility into Cardinal Risky Utility: A Comment on Chung, Glimcher, and Tymula (2019)," American Economic Journal: Microeconomics, American Economic Association, vol. 14(2), pages 561-565, May.
    • Handle: RePEc:aea:aejmic:v:14:y:2022:i:2:p:561-65
    DOI: 10.1257/mic.20190338
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    More about this item

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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