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Optimal cognitive processes for lotteries

Author

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  • Alarie, Yves

    (Université de Montréal)

  • Dionne, Georges

    (HEC Montreal, Canada Research Chair in Risk Management)

Abstract

The aim of the present paper is to propose a rational model of decision-making for lotteries. The key element of the theory is the use of cognitive processes. The maximization of the degree of confidence associated with each judgment involves different processes. Our contribution explains some major violations of the expected-utility theory for decisions on lotteries.

Suggested Citation

  • Alarie, Yves & Dionne, Georges, 2001. "Optimal cognitive processes for lotteries," Working Papers 01-2, HEC Montreal, Canada Research Chair in Risk Management.
    • Handle: RePEc:ris:crcrmw:2001_002
    as

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    References listed on IDEAS

    as
    1. Alarie, Yves & Dionne, Georges, 2001. "Lottery Decisions and Probability Weighting Function," Journal of Risk and Uncertainty, Springer, vol. 22(1), pages 21-33, January.
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    More about this item

    Keywords

    Cognitive process; lottery; paradox; bounded rationality; preference reversal; common ratio;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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