Dhami, Sanjit; al-Nowaihi, Ali - Department of Economics, Leicester University - 2005
of extremely low probability and treat extremely high probability events as certain. Decision models, such as rank … dependent utility (RDU) and cumulative prospect theory (CP), use probability weighting functions. Existing probability weighting … presence of fixed costs and actuarially unfair premiums, to insure fully against losses of sufficiently low probability. This …