IDEAS home Printed from https://ideas.repec.org/p/lvl/lacicr/0415.html
   My bibliography  Save this paper

On the Necessity of Using Lottery Qualities

Author

Listed:
  • Yves Alarie
  • Georges Dionne

Abstract

The aim of this paper is to propose a model of decision-making for lotteries. The key element of the theory is the use of lottery qualities. Qualities allow the derivation of optimal decision-making processes and are taken explicitly into account for lottery evaluation. Our contribution explains the major violations of the expected utility theory for decisions on two-point lotteries and shows the necessity of giving explicit consideration to the lottery qualities.

Suggested Citation

  • Yves Alarie & Georges Dionne, 2004. "On the Necessity of Using Lottery Qualities," Cahiers de recherche 0415, CIRPEE.
  • Handle: RePEc:lvl:lacicr:0415
    as

    Download full text from publisher

    File URL: http://www.cirpee.org/fileadmin/documents/Cahiers_2004/CIRPEE04-15.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
    2. Ranyard, Rob, 1995. "Reversals of Preference between Compound and Simple Risks: The Role of Editing Heuristics," Journal of Risk and Uncertainty, Springer, vol. 11(2), pages 159-175, September.
    3. Tversky, Amos & Slovic, Paul & Kahneman, Daniel, 1990. "The Causes of Preference Reversal," American Economic Review, American Economic Association, vol. 80(1), pages 204-217, March.
    4. Bostic, Raphael & Herrnstein, R. J. & Luce, R. Duncan, 1990. "The effect on the preference-reversal phenomenon of using choice indifferences," Journal of Economic Behavior & Organization, Elsevier, vol. 13(2), pages 193-212, March.
    5. Leland, Jonathan W, 1994. "Generalized Similarity Judgments: An Alternative Explanation for Choice Anomalies," Journal of Risk and Uncertainty, Springer, vol. 9(2), pages 151-172, October.
    6. Alarie, Yves & Dionne, Georges, 2001. "Lottery Decisions and Probability Weighting Function," Journal of Risk and Uncertainty, Springer, vol. 22(1), pages 21-33, January.
    7. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
    8. Drazen Prelec, 1998. "The Probability Weighting Function," Econometrica, Econometric Society, vol. 66(3), pages 497-528, May.
    9. McFadden, Daniel, 1999. "Rationality for Economists?," Journal of Risk and Uncertainty, Springer, vol. 19(1-3), pages 73-105, December.
    10. Machina, Mark J, 1987. "Choice under Uncertainty: Problems Solved and Unsolved," Journal of Economic Perspectives, American Economic Association, vol. 1(1), pages 121-154, Summer.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yves Alarie & Georges Dionne, 2006. "Lottery qualities," Journal of Risk and Uncertainty, Springer, vol. 32(3), pages 195-216, May.

    More about this item

    Keywords

    Lottery choice; common ratio; preference reversal; pricing; lottery test; cognitive process; certainty equivalent; lottery quality;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lvl:lacicr:0415. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Manuel Paradis). General contact details of provider: http://edirc.repec.org/data/cirpeca.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.