Parameter-Free Elicitation of Utility and Probability Weighting Functions

Parameter-Free Elicitation of Utility and Probability Weighting Functions

This paper proposes a two-step method to successively elicit utility functions and decision weights under rank-dependent expected utility theory and its "more descriptive" version: cumulative prospect theory. The novelty of the method is that it is parameter-free, and thus elicits the whol...

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Veröffentlicht in:Management Science. - Institute for Operations Research and the Management Sciences, 1954. - 46(2000), 11, Seite 1497-1512
1. Verfasser: Abdellaoui, Mohammed (VerfasserIn)
Format: Online-Aufsatz
Sprache:English
Veröffentlicht: 2000
Zugriff auf das übergeordnete Werk:Management Science
Schlagworte:Decision Making Expected Utility Rank-Dependent Expected Utility Cumulative Prospect Theory Probability Weighting Function Mathematics Economics Information science Applied sciences Philosophy
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520 |a This paper proposes a two-step method to successively elicit utility functions and decision weights under rank-dependent expected utility theory and its "more descriptive" version: cumulative prospect theory. The novelty of the method is that it is parameter-free, and thus elicits the whole individual preference functional without imposing any prior restriction. This method is used in an experimental study to elicit individual utility and probability weighting functions for monetary outcomes in the gain and loss domains. Concave utility functions are obtained for gains and convex utility functions for losses. The elicited weighting functions satisfy upper and lower subadditivity and are consistent with previous parametric estimations. The data also show that the probability weighting function for losses is more "elevated" than for gains. 
540 |a Copyright 2000 INFORMS 
650 4 |a Decision Making 
650 4 |a Expected Utility 
650 4 |a Rank-Dependent Expected Utility 
650 4 |a Cumulative Prospect Theory 
650 4 |a Probability Weighting Function 
650 4 |a Mathematics  |x Mathematical expressions  |x Mathematical functions  |x Weighting functions 
650 4 |a Economics  |x Microeconomics  |x Economic utility  |x Utility functions 
650 4 |a Information science  |x Information search and retrieval  |x Information search  |x Search strategies  |x Term weighting 
650 4 |a Economics  |x Economic disciplines  |x Financial economics  |x Finance  |x Financial analysis  |x Risk management  |x Risk aversion 
650 4 |a Economics  |x Microeconomics  |x Economic utility  |x Expected utility 
650 4 |a Applied sciences  |x Computer science  |x Computer engineering  |x Computer software 
650 4 |a Philosophy  |x Applied philosophy  |x Philosophy of science  |x Scientific method  |x Experimentation 
650 4 |a Mathematics  |x Pure mathematics  |x Geometry  |x Geometric properties  |x Curvature 
650 4 |a Mathematics  |x Applied mathematics  |x Statistics  |x Applied statistics  |x Descriptive statistics  |x Central tendencies  |x Statistical median 
650 4 |a Economics  |x Economic disciplines  |x Financial economics  |x Financial markets  |x Market conditions  |x Economic uncertainty 
655 4 |a research-article 
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