Empirical Rules of Thumb for Choice under Uncertainty
A substantial body of empirical evidence shows that individuals overweight extreme events and act in conflict with the expected utility theory. These findings were the primary motivation behind the development of the rank-dependent utility theory. The purpose of this paper is to demonstrate that some plausible empirical rules of thumb for choice under uncertainty can be rationalized by the rank-dependent utility theory.
|Date of creation:||May 2002|
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- Milton Friedman & L. J. Savage, 1948. "The Utility Analysis of Choices Involving Risk," Journal of Political Economy, University of Chicago Press, vol. 56, pages 279-279.
- Ramsey, Frank P., 1926. "Truth and Probability," Histoy of Economic Thought Chapters,in: Braithwaite, R. B. (ed.), The Foundations of Mathematics and other Logical Essays, chapter 7, pages 156-198 McMaster University Archive for the History of Economic Thought. Full references (including those not matched with items on IDEAS)
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