Decision Sciences
8 years ago

New model predicts how prizes affect decision-making under risk.

Lecture notes in economics and mathematical systems
A Rank-Dependent Utility Model with Prize-Dependent Distortion of Probabilities
Clemens Puppe

Paper Summary

The new model of choice under risk presented in the article is more general than anticipated utility theory because it allows probability distortion to depend on the prizes available. However, it restricts these distortions to be the same for all probabilities.

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