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Curvature of the probability weighting function
 Management Science
, 1996
"... Empirical studies have shown that decision makers do not usually treat probabilities linearly. Instead, people tend to overweight small probabilities and underweight large probabilities. One way to model such distortions in decision making under risk is through a probability weighting function. We ..."
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Cited by 290 (5 self)
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Empirical studies have shown that decision makers do not usually treat probabilities linearly. Instead, people tend to overweight small probabilities and underweight large probabilities. One way to model such distortions in decision making under risk is through a probability weighting function. We present a nonparametric estimation procedure for assessing the probability weighting function and value function at the level of the individual subject. The evidence in the domain of gains supports a twoparameter weighting function, where each parameter is given a psychological interpretation: one parameter measures how the decision maker discriminates probabilities, and the other parameter measures how attractive the decision maker views gambling. These findings are consistent with a growing body of empirical and theoretical work attempting to establish a psychological rationale for the probability weighting function. ª 1999 Academic Press The perception of probability has a psychophysics all its own. If men have a 2 % chance of contracting a particular disease and women have a 1% chance, we perceive the risk for men as twice the risk for women. However, the same difference of 1 % appears less dramatic when the chance of con
Parameterfree elicitation of utility and probability weighting functions.
 Manag. Sci.
, 2000
"... T his paper proposes a twostep method to successively elicit utility functions and decision weights under rankdependent expected utility theory and its ''more descriptive'' version: cumulative prospect theory. The novelty of the method is that it is parameterfree, and thus el ..."
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Cited by 183 (5 self)
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T his paper proposes a twostep method to successively elicit utility functions and decision weights under rankdependent expected utility theory and its ''more descriptive'' version: cumulative prospect theory. The novelty of the method is that it is parameterfree, 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.
Ambiguity Made Precise: A Comparative Foundation
, 2000
"... The theory of subjective expected utility (SEU) has been recently extended to allow ambiguity to matter for choice. We propose a notion of absolute ambiguity aversion by build#wJ on a notion of comparative ambiguity aversion. We characterize it for a preference mo d#w which encompasses some of the m ..."
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Cited by 147 (22 self)
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The theory of subjective expected utility (SEU) has been recently extended to allow ambiguity to matter for choice. We propose a notion of absolute ambiguity aversion by build#wJ on a notion of comparative ambiguity aversion. We characterize it for a preference mo d#w which encompasses some of the most popular mod#wk in the literature. We nextbuild on these id#se to provid# ad efinition of unambiguous actand event, and showthe characterization of the latter. As an illustration, we consider the classical Ellsberg 3color urn problemand find that the notions developed in the paper provide intuitive answers.
Choice under uncertainty with the best and worst in mind: NEOadditive capacities, mimeo, Universität
, 2005
"... Abstract We develop the simplest generalization of subjective expected utility that can accommodate both optimistic and pessimistic attitudes towards uncertaintyChoquet expected utility with nonextremeoutcomeadditive (neoadditive) capacities.A neoadditive capacity can be expressed as the conv ..."
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Cited by 72 (15 self)
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Abstract We develop the simplest generalization of subjective expected utility that can accommodate both optimistic and pessimistic attitudes towards uncertaintyChoquet expected utility with nonextremeoutcomeadditive (neoadditive) capacities.A neoadditive capacity can be expressed as the convex combination of a probability and a special capacity, we refer to as a Hurwicz capacity, that only distinguishes between whether an event is impossible, possible or certain. We show that neoadditive capacities can be readily applied in economic problems, and we provide an axiomatization in a framework of purely subjective uncertainty.
Estimating risk preferences from deductible choice
 American Economic Review
, 1997
"... This work is distributed as a Discussion Paper by the ..."
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Cited by 67 (0 self)
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This work is distributed as a Discussion Paper by the
CHOICEBASED ELICITATION AND DECOMPOSITION OF DECISION WEIGHTS FOR GAINS AND LOSSES UNDER UNCERTAINTY
, 2003
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Causes of Allais common consequence paradoxes: an experimental dissection
 JOURNAL OF MATHEMATICAL PSYCHOLOGY
, 2002
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New paradoxes of risky decision making
 Psychological Review
"... During the last 25 years, prospect theory and its successor, cumulative prospect theory, replaced expected utility as the dominant descriptive theories of risky decision making. Although these models account for the original Allais paradoxes, 11 new paradoxes show where prospect theories lead to sel ..."
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Cited by 42 (13 self)
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During the last 25 years, prospect theory and its successor, cumulative prospect theory, replaced expected utility as the dominant descriptive theories of risky decision making. Although these models account for the original Allais paradoxes, 11 new paradoxes show where prospect theories lead to selfcontradiction or systematic false predictions. The new findings are consistent with and, in several cases, were predicted in advance by simple “configural weight ” models in which probabilityconsequence branches are weighted by a function that depends on branch probability and ranks of consequences on discrete branches. Although they have some similarities to later models called “rankdependent utility, ” configural weight models do not satisfy coalescing, the assumption that branches leading to the same consequence can be combined by adding their probabilities. Nor do they satisfy cancellation, the “independence ” assumption that branches common to both alternatives can be removed. The transfer of attention exchange model, with parameters estimated from previous data, correctly predicts results with all 11 new paradoxes. Apparently, people do not frame choices as prospects but, instead, as trees with branches.
Tests of rankdependent utility and cumulative prospect theory in gambles represented by natural frequencies: Effects of format, event framing, and branch splitting
 ORGANIZATIONAL BEHAVIOR AND HUMAN DECISION PROCESSES
, 2004
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