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Comment on Prelec's (1998). "The Probability Weighting Function"

Author

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  • Luce, R.D.

Abstract

An alternative condition, called reduction invariance, is given to derive Prelec's (1998) form for the weighting function in separable utility theory. The condition, which is a variant on the reduction of compound gambles, is appreciably simpler and more empirically testable than Prelec's compound invariance and a simpler proof is provided. Both this and Prelec's condition are generalized leading to more general functions. Howener, of these various families, the only one that includes the rational power function as a special case is Prelec's formula.

Suggested Citation

  • Luce, R.D., 1998. "Comment on Prelec's (1998). "The Probability Weighting Function"," Papers 98-99-3, California Irvine - School of Social Sciences.
    • Handle: RePEc:fth:calirv:98-99-3
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    Keywords

    MATHEMATICAL ANALYSIS ; UTILITY FUNCTION;

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
    • D10 - Microeconomics - - Household Behavior - - - General

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