We consider an optimal insurance design problem for an individual whose preferences are dictated by the rank-dependent expected utility (RDEU) theory with a concave utility function and an inverse-S shaped probability distortion function. This type of RDEU is known to describe human behavior...

We provide a characterization of comparative weak risk aversion and comparative RDEU risk aversion for RDEU preferences and, in particular, we correct a claim made by Quiggin (1993) regarding comparative RDEU risk aversion. We then apply the analysis of comparative risk aversion to a problem of...

Experimental studies show that people's risk preferences depend non-linearly on probabilities, but relatively little is known about how probability weighting influences investment decisions. In this paper we analyze the portfolio choice problem of investors who maximize rank-dependent utility in...