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Option price without expected utility

  • Jindapon, Paan
  • Shaw, W. Douglass

We consider the meaning of the option price, commonly acknowledged as the preferred ex ante welfare measure, in the rank-dependent expected utility (RDEU) framework. The importance of this pertains to performing benefit-cost analysis when RDEU maximizers are prevalent in society.

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File URL: http://www.sciencedirect.com/science/article/B6V84-4S21TH9-5/2/55ab2a8238b209aacc9cfea8fae69ef2
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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 100 (2008)
Issue (Month): 3 (September)
Pages: 408-410

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Handle: RePEc:eee:ecolet:v:100:y:2008:i:3:p:408-410
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. W. Henry Chiu, 1996. "Risk Aversion with State-Dependent Preferences in the Rank-Dependent Expected Utility Theory," The Geneva Risk and Insurance Review, Palgrave Macmillan, vol. 21(2), pages 159-177, December.
  2. Shaw, W. Douglass & Woodward, Richard T., 2008. "Why environmental and resource economists should care about non-expected utility models," Resource and Energy Economics, Elsevier, vol. 30(1), pages 66-89, January.
  3. Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
  4. Tversky, Amos & Kahneman, Daniel, 1992. " Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
  5. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
  6. Uzi Segal & Avia Spivak, 1988. "First Order Versus Second Order Risk Aversion," UCLA Economics Working Papers 540, UCLA Department of Economics.
  7. W Shaw & Mary Riddell & Paul Jakus, 2005. "Valuing Environmental Changes in the Presence of Risk: A Review and Discussion of Some Empirical Issues," Working Papers 2005-02, Utah State University, Department of Economics.
  8. Desvousges, William H. & Smith, V. Kerry & Fisher, Ann, 1987. "Option price estimates for water quality improvements: A contingent valuation study for the monongahela river," Journal of Environmental Economics and Management, Elsevier, vol. 14(3), pages 248-267, September.
  9. Graham, Daniel A, 1981. "Cost-Benefit Analysis under Uncertainty," American Economic Review, American Economic Association, vol. 71(4), pages 715-25, September.
  10. Mary Riddel & W. Shaw, 2006. "A theoretically-consistent empirical model of non-expected utility: An application to nuclear-waste transport," Journal of Risk and Uncertainty, Springer, vol. 32(2), pages 131-150, March.
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