Publication
Jan 2008
This paper provides preference foundations for parametric weighting functions under rank-dependent utility. This is achieved by decomposing the independence axiom of expected utility into separate, meaningful properties. These conditions allow the authors to characterize rank-dependent utility with power and exponential weighting functions. Moreover, by allowing probabilistic risk attitudes to vary within the probability interval, they obtain a preference foundation for rank-dependent utility with parametric inverse-S-shaped weighting function.
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English (PDF, 35 pages, 578 KB) |
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Author | Enrico Diecidue, Ulrich Schmidt, Horst Zank |
Series | Kiel Institute Working Papers |
Issue | 1395 |
Publisher | Kiel Institute for the World Economy |
Copyright | © 2008 Kiel Institute for the World Economy |