The Probability Weighting Function
A probability weighting function w(p) is a prominent feature of several non-expected utility theories, including prospect theory and rank-dependent models. Empirical estimates indicate that w(p) is regressive (first w(p) > p, then w(p) < p), s-shaped (first concave, then convex), and asymmetri...
| Veröffentlicht in: | Econometrica. - Wiley. - 66(1998), 3, Seite 497-527 |
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| 1. Verfasser: | |
| Format: | Online-Aufsatz |
| Sprache: | English |
| Veröffentlicht: |
1998
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| Zugriff auf das übergeordnete Werk: | Econometrica |
| Schlagworte: | Expected Utility Theory Non-Expected Utility Theory Prospect Theory Allais Paradox Mathematics Economics Information science Philosophy |
| Zusammenfassung: | A probability weighting function w(p) is a prominent feature of several non-expected utility theories, including prospect theory and rank-dependent models. Empirical estimates indicate that w(p) is regressive (first w(p) > p, then w(p) < p), s-shaped (first concave, then convex), and asymmetrical (intersecting the diagonal at about 1/3). The paper states axioms for several w(p) forms, including the compound invariant, w(p) = <tex-math>${\rm exp}\{-\{-{\rm ln}\ p\}^{\alpha}\}$</tex-math>, 0 < α < 1, which is regressive, s-shaped, and with an invariant fixed point and inflection point at 1/e = .37. |
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| ISSN: | 14680262 |
| DOI: | 10.2307/2998573 |