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Theory and Decision

Erschienen in:

26.08.2016

Piecewise linear rank-dependent utility

verfasst von: Craig S. Webb

Erschienen in: Theory and Decision | Ausgabe 3/2017

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Abstract

Choice under risk is modelled using a piecewise linear version of rank-dependent utility. This model can be considered a continuous version of NEO-expected utility (Chateauneuf et al., J Econ Theory 137:538–567, 2007). In a framework of objective probabilities, a preference foundation is given, without requiring a rich structure on the outcome set. The key axiom is called complementary additivity.

Vorheriger Artikel Is diversity in capabilities desirable when adding decision makers?

Nächster Artikel Information transparency and equilibrium selection in coordination games: an experimental study

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NEO-expected utility has been used by Abdellaoui et al. (2010), Dominiak et al. (2012), Dominiak and Lefort (2013), Ford et al. (2013), Eichberger et al. (2012), Eichberger and Kelsey (2011, (2014), Ludwig and Zimper (2014), Romm (2014), Teitelbaum (2007), and Zimper (2012).

A weak order over outcomes can be assumed instead of a strict order. In that case, it is required that X has at least three indifference classes when passing to the quotient.

The order induced by the first-order stochastic dominance relation is complete in the two-outcome case.

A similar notion motivates, under uncertainty, the comonotonic independence axiom, where act mixtures that preserve outcome ranking structure of the acts are handled “rationally”.

In the appendix, it is shown that complementary additivity implies a condition called coordinate independence, which is sufficient, in the presence of the basic axioms, to derive an additive representation.

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Titel: Piecewise linear rank-dependent utility
verfasst von: Craig S. Webb
Publikationsdatum: 26.08.2016
Verlag: Springer US
Erschienen in: Theory and Decision / Ausgabe 3/2017
Print ISSN: 0040-5833
Elektronische ISSN: 1573-7187
DOI: https://doi.org/10.1007/s11238-016-9569-5

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