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Utility of a quarter-million

  • Blavatskyy, Pavlo R.
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    This paper presents a new method how to elicit the Bernoulli utility function over a wide range of monetary outcomes using approximation through Taylor expansion. The new method is applied to the natural experiment provided by the Swiss version of the television show Deal or No Deal.

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    Article provided by Elsevier in its journal Economics Letters.

    Volume (Year): 117 (2012)
    Issue (Month): 3 ()
    Pages: 650-653

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    Handle: RePEc:eee:ecolet:v:117:y:2012:i:3:p:650-653
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    1. Fabrizio Botti & Anna Conte & Daniela T. Di Cagno & Carlo D'Ippoliti, . "Risk attitude in real decision proBLEMs," Quaderni DEF 144, Dipartimento di Economia e Finanza, LUISS Guido Carli.
    2. Cary Deck & Jungmin Lee & Javier Reyes, 2008. "Risk attitudes in large stake gambles: evidence from a game show," Applied Economics, Taylor & Francis Journals, vol. 40(1), pages 41-52.
    3. Blavatskyy, Pavlo R., 2008. "Stochastic utility theorem," Journal of Mathematical Economics, Elsevier, vol. 44(11), pages 1049-1056, December.
    4. Abdellaoui, Mohammed & Barrios, Carolina & Wakker, Peter P., 2007. "Reconciling introspective utility with revealed preference: Experimental arguments based on prospect theory," Journal of Econometrics, Elsevier, vol. 138(1), pages 356-378, May.
    5. Mohammed Abdellaoui, 2000. "Parameter-Free Elicitation of Utility and Probability Weighting Functions," Management Science, INFORMS, vol. 46(11), pages 1497-1512, November.
    6. Pavlo Blavatskyy & Ganna Pogrebna, 2008. "Risk Aversion when Gains are Likely and Unlikely: Evidence from a Natural Experiment with Large Stakes," Theory and Decision, Springer, vol. 64(2), pages 395-420, March.
    7. Thierry Post & Martijn J. van den Assem & Guido Baltussen & Richard H. Thaler, 2008. "Deal or No Deal? Decision Making under Risk in a Large-Payoff Game Show," American Economic Review, American Economic Association, vol. 98(1), pages 38-71, March.
    8. Hey, John D & Orme, Chris, 1994. "Investigating Generalizations of Expected Utility Theory Using Experimental Data," Econometrica, Econometric Society, vol. 62(6), pages 1291-1326, November.
    9. Peter Wakker & Daniel Deneffe, 1996. "Eliciting von Neumann-Morgenstern Utilities When Probabilities Are Distorted or Unknown," Management Science, INFORMS, vol. 42(8), pages 1131-1150, August.
    10. Nicolas de Roos & Yianis Sarafidis, 2010. "Decision making under risk in Deal or No Deal," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(6), pages 987-1027.
    11. Harry Markowitz, 1952. "The Utility of Wealth," Journal of Political Economy, University of Chicago Press, vol. 60, pages 151.
    12. Pavlo Blavatskyy, 2006. "Error Propagation in the Elicitation of Utility and Probability Weighting Functions," Theory and Decision, Springer, vol. 60(2), pages 315-334, 05.
    13. Pavlo R. Blavatskyy & Ganna Pogrebna, 2010. "Models of stochastic choice and decision theories: why both are important for analyzing decisions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(6), pages 963-986.
    14. Han Bleichrodt & Jose Luis Pinto, 2000. "A Parameter-Free Elicitation of the Probability Weighting Function in Medical Decision Analysis," Management Science, INFORMS, vol. 46(11), pages 1485-1496, November.
    15. Pavlo R. Blavatskyy, 2011. "Stronger Utility," Working Papers 2011-16, Faculty of Economics and Statistics, University of Innsbruck.
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