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Ausi Expected Utility : An Anticipated Utility Theory of Relative Disappointment Aversion

Author

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  • GRANT, Simon

    (Australian National University)

  • KAJII, Atsushi

    (CORE, Université catholique de Louvain, B-1348 Louvain-la-Neuve, Belgium)

Abstract

In recent years there has been a growing theoretical, experimental and empirical challenge to Expected Utility Theory, the overwhelmingly dominant paradigm for modeling decision-making under risk. However, there has been relatively little work done in providing easily parameterized alternatives for applied work. In this paper we provide an axiomatization for a representation of preferences over lotteries that is only one parameter richer than expected utility. Our model is a special case of Quiggin's Rank Dependent Expected Utility. Moreover, we show that the same restriction on this parameter is required for: risk aversion; intuitive comparative static results for a reasonably general class of economically interesting choice problems; and accommodating some of the most well-known violations of Expected Utility Theory.

Suggested Citation

  • GRANT, Simon & KAJII, Atsushi, 1994. "Ausi Expected Utility : An Anticipated Utility Theory of Relative Disappointment Aversion," LIDAM Discussion Papers CORE 1994045, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:1994045
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    Cited by:

    1. Abdellaoui, Mohammed & Bleichrodt, Han, 2007. "Eliciting Gul's theory of disappointment aversion by the tradeoff method," Journal of Economic Psychology, Elsevier, vol. 28(6), pages 631-645, December.
    2. Freeman, David, 2015. "Calibration without reduction for non-expected utility," Journal of Economic Theory, Elsevier, vol. 158(PA), pages 21-32.
    3. Thierry Chauveau, 2016. "Stochastic dominance, risk and disappointment: a synthesis," Post-Print halshs-01025102, HAL.
    4. Grant, Simon & Kajii, Atsushi & Polak, Ben, 2001. "Different notions of disappointment aversion," Economics Letters, Elsevier, vol. 70(2), pages 203-208, February.
    5. Kfir Eliaz & Debraj Ray & Ronny Razin, 2006. "Choice Shifts in Groups: A Decision-Theoretic Basis," American Economic Review, American Economic Association, vol. 96(4), pages 1321-1332, September.
    6. Meng, Jingyi & Webb, Craig S. & Zank, Horst, 2024. "Mixture independence foundations for expected utility," Journal of Mathematical Economics, Elsevier, vol. 111(C).
    7. Jamie Alcock & Petra Andrlikova, 2018. "Asymmetric Dependence in Real Estate Investment Trusts: An Asset-Pricing Analysis," The Journal of Real Estate Finance and Economics, Springer, vol. 56(2), pages 183-216, February.
    8. Thierry Chauveau, 2012. "Subjective risk and disappointment," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00747902, HAL.
    9. Thierry Chauveau & Nicolas Nalpas, 2011. "Disappointment Models: an axiomatic approach," Post-Print halshs-00560543, HAL.
    10. Bian, Yueqing & Xiao, Tiaojun, 2025. "Returns management in a supply chain considering freight insurance and consumer disappointment aversion," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 195(C).
    11. Daniel R. Burghart, 2020. "The two faces of independence: betweenness and homotheticity," Theory and Decision, Springer, vol. 88(4), pages 567-593, May.
    12. Kfir Eliaz & Debraj Ray, 2004. "Choice Shifts in Groups," Econometric Society 2004 North American Summer Meetings 205, Econometric Society.
    13. Thierry Chauveau, 2014. "Stochastic dominance, risk and disappointment: a synthesis," Documents de travail du Centre d'Economie de la Sorbonne 14054rr, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne, revised Jan 2016.
    14. Thierry Chauveau, 2014. "Stochastic dominance, risk and disappointment: a synthesis," Documents de travail du Centre d'Economie de la Sorbonne 14054r, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne, revised Jul 2015.
    15. Thierry Chauveau, 2012. "Subjective risk and disappointment," Documents de travail du Centre d'Economie de la Sorbonne 12063, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    16. Carlos Laciana & Elke Weber, 2008. "Correcting expected utility for comparisons between alternative outcomes: A unified parameterization of regret and disappointment," Journal of Risk and Uncertainty, Springer, vol. 36(1), pages 1-17, February.
    17. Ryan, Matthew J., 2006. "Risk aversion in RDEU," Journal of Mathematical Economics, Elsevier, vol. 42(6), pages 675-697, September.
    18. Sudeep Bhatia & Graham Loomes & Daniel Read, 2021. "Establishing the laws of preferential choice behavior," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 16(6), pages 1324-1369, November.
    19. Ormiston, Michael B. & E. Schlee, Edward, 1999. "Comparative statics tests between decision models under risk," Journal of Mathematical Economics, Elsevier, vol. 32(2), pages 145-166, October.
    20. Lindsey, Robin, 2011. "State-dependent congestion pricing with reference-dependent preferences," Transportation Research Part B: Methodological, Elsevier, vol. 45(10), pages 1501-1526.

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