A new axiomatization of rank-dependent expected utility with tradeoff consistency for equally likely outcomes

Ulrich Schmidt, Horst Zank

Research output: Contribution to journalArticlepeer-review

Abstract

This paper provides a new axiomatization of rank-dependent expected utility by relaxing tradeoff consistency to hold only when the involved outcomes are equally likely. The resulting weakened variant of tradeoff consistency is considerably simpler and intuitively more appealing than the original condition. Consequently, an improved tool for empirical studies and the elicitation of utilities is provided. It turns out that in the presence of weak ordering, simple-continuity, and stochastic dominance, the new tradeoff consistency for equally likely outcomes is sufficient to derive rank-dependent expected utility for general lotteries. © 2001 Elsevier Science B.V.
Original languageEnglish
Pages (from-to)483-491
Number of pages8
JournalJournal of Mathematical Economics
Volume35
Issue number4
DOIs
Publication statusPublished - Jul 2001

Keywords

  • D81
  • Equally likely outcomes
  • Rank-dependent expected utility
  • Tradeoff consistency

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