Reasons for Rank-Dependent Utility Evaluation
Three reasons for why people may evaluate utility in a rank-dependent fashion have been suggested: (a) rank-dependent weighting is a function of perceptual biases and thus not prescriptively defensible; (b) weights are (re)distributed by motivational processes that reflect stable personality characteristics of the decision maker; and (c) weights are (re)distributed as a function of the situation, allowing rank-dependent evaluation to be a rational response to an environment with asymmetric loss functions. By modifying a study by Wakker, Erev, and Weber (1994) we show that all three processes--that is, perceptual biases, individual predispositions in weighting, as well as rational adaptation to an asymmetric loss function--can be involved in rank-dependent weighting. Copyright 1997 by Kluwer Academic Publishers
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Volume (Year): 14 (1997)
Issue (Month): 1 (January)
Pages: 41-61
| Handle: | RePEc:kap:jrisku:v:14:y:1997:i:1:p:41-61 |
| Contact details of provider: | Web page: http://www.springer.com
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| Order Information: | Web: http://www.springer.com/economics/economic+theory/journal/11166/PS2 |
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