Calibration results for rank-dependent expected utility
If its utility function is everywhere increasing and concave, rank-dependent expected utility shares a troubling property with expected utility aversion to the same moderate-stakes risk at every wealth level implies an extreme aversion to large-stakes risks. In fact, the problem may be even worse for rank-dependent expected utility, since the moderate-stakes risk need not be actuarially fair.
Volume (Year): 4 (2001)
Issue (Month): 10 ()
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- Matthew Rabin, 2001.
"Risk Aversion and Expected-Utility Theory: A Calibration Theorem,"
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