NON-EXPECTED UTILITY THEORIES: WEIGHTED EXPECTED, RANK DEPENDENT, AND CUMULATIVE PROSPECT THEORY UTILITY

This paper discusses some of the failings of expected utility including the Allais paradox and expected utility's inadequate one dimensional characterization of risk. Three alternatives to expected utility are discussed at length; weighted expected utility, rank dependent utility, and cumulative prospect theory. Each alternative is capable of explaining Allais paradox type problems and permits more sophisticated multi dimensional risk preferences.

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Year of publication:	2002
Authors:	Tuthill, Jonathan W. ; Frechette, Darren L.
Institutions:	NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management
Subject:	Risk and Uncertainty

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Extent:	application/pdf
Series:	2002 Conference, April 22-23, 2002, St. Louis, Missouri.
Type of publication:	Book / Working Paper
Notes:	The text is part of a series 2002 Conference, St. Louis, Missouri, April 22-23 Number 19073
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005807436