Lottery Dependent Utility

Lottery Dependent Utility

In this paper we propose a model for decision making under risk that is capable of predicting empirically observed preference patterns that have been found to be incompatible with the expected utility model. The model departs from the classical expected utility model by allowing utilities to depend...

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Bibliographische Detailangaben
Veröffentlicht in:Management Science. - Institute for Operations Research and the Management Sciences, 1954. - 33(1987), 11, Seite 1367-1382
1. Verfasser: Becker, Joao L. (VerfasserIn)
Weitere Verfasser: Sarin, Rakesh K.
Format: Online-Aufsatz
Sprache:English
Veröffentlicht: 1987
Zugriff auf das übergeordnete Werk:Management Science
Schlagworte:Utility Theory Preference Theory Economics Applied sciences Law Behavioral sciences Philosophy Mathematics
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520 |a In this paper we propose a model for decision making under risk that is capable of predicting empirically observed preference patterns that have been found to be incompatible with the expected utility model. The model departs from the classical expected utility model by allowing utilities to depend on the lottery. The dependence of utilities on the lottery being evaluated is achieved by restricting the utility measure to a convenient parametric family of functions. The idea then is to use each lottery to determine a specific parameter value thus characterizing the utility function for each particular lottery. The expected value of this lottery dependent utility function provides the overall measure of preference. The model retains the properties of transitivity, stochastic dominance, and continuity. It also permits types of analyses, such as exploitation of basic attitudes toward risk through risk aversion properties, that have been found useful in decision theory. The primary use of our model is in descriptive or predictive research and applications. For some decision makers who wish to retain the preference patterns that are incompatible with the substitution principle, even after the implications of their choices are made transparent, our model could be of prescriptive use as well. 
540 |a Copyright 1987 The Institute of Management Sciences 
650 4 |a Utility Theory 
650 4 |a Preference Theory 
650 4 |a Economics  |x Economic disciplines  |x Financial economics  |x Finance  |x Financial analysis  |x Risk management  |x Risk aversion 
650 4 |a Applied sciences  |x Research methods  |x Modeling 
650 4 |a Economics  |x Microeconomics  |x Economic utility  |x Utility functions 
650 4 |a Law  |x Civil law  |x Property law  |x Intellectual property law  |x Industrial property  |x Utility models 
650 4 |a Economics  |x Microeconomics  |x Economic utility  |x Expected utility 
650 4 |a Economics  |x Microeconomics  |x Economic utility 
650 4 |a Behavioral sciences  |x Leisure studies  |x Recreation  |x Games  |x Gambling  |x Lotteries 
650 4 |a Philosophy  |x Logic  |x Paradoxes 
650 4 |a Economics  |x Economic disciplines  |x Financial economics  |x Finance  |x Financial analysis  |x Risk management  |x Risk preferences  |x Risk aversion preference 
650 4 |a Mathematics  |x Pure mathematics  |x Probability theory  |x Stochastic models 
655 4 |a research-article 
700 1 |a Sarin, Rakesh K.  |e verfasserin  |4 aut 
773 0 8 |i Enthalten in  |t Management Science  |d Institute for Operations Research and the Management Sciences, 1954  |g 33(1987), 11, Seite 1367-1382  |w (DE-627)320623602  |w (DE-600)2023019-9  |x 15265501  |7 nnns 
773 1 8 |g volume:33  |g year:1987  |g number:11  |g pages:1367-1382 
856 4 0 |u https://www.jstor.org/stable/2631918  |3 Volltext 
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