Risk attitudes and decision weights

Article Abstract:

The decision weights derived from an individual's risk behavior, nonlinear preferences between risky alternatives and dependence on uncertainty source is presented. The result is an S-shaped weighting function which assigns large weights to small probabilities and small weights to high probabilities. Using these, procedures for evaluating different weighting functions with respect to the degree of deviation from expected utility and for assessing a person's weighting functions for risk and uncertainty, respectively, are obtained.

Econometrics, Decision theory

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A definition of subjective probabilities with state-dependent preferences

Article Abstract:

An analysis of the development of subjective probabilities under conditions of state-dependent preferences is presented. It is shown that such type of probabilities sets a conceptual difficulty. Examples may be developed which indicate the inherently state dependent nature of preferences over outcomes in the process of decision making. Sufficient conditions may also be provided for the subjective expected utility representation of preference relations over acts.

Decision-making, Models, Decision making, Analysis, Probabilities, Probability theory, Utility theory, Utility functions

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