Parametric weighting functions

Enrico Diecidue; Ulrich Schmidt; Horst Zank

doi:10.1016/j.jet.2008.10.004

Parametric weighting functions

Enrico Diecidue, Ulrich Schmidt, Horst Zank

Economics

Research output: Contribution to journal › Article › peer-review

Abstract

This paper provides preference foundations for parametric weighting functions under rank-dependent utility. This is achieved by decomposing the independence axiom of expected utility into separate meaningful properties. These conditions allow us to characterize rank-dependent utility with power and exponential weighting functions. Moreover, by allowing probabilistic risk attitudes to vary within the probability interval, a preference foundation for rank-dependent utility with parametric inverse-S shaped weighting function is obtained. © 2008 Elsevier Inc. All rights reserved.

Original language	English
Pages (from-to)	1102-1118
Number of pages	16
Journal	Journal of Economic Theory
Volume	144
Issue number	3
DOIs	https://doi.org/10.1016/j.jet.2008.10.004
Publication status	Published - May 2009

Keywords

Comonotonic independence
Preference foundation
Probability weighting function
Rank-dependent utility

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10.1016/j.jet.2008.10.004

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title = "Parametric weighting functions",

abstract = "This paper provides preference foundations for parametric weighting functions under rank-dependent utility. This is achieved by decomposing the independence axiom of expected utility into separate meaningful properties. These conditions allow us to characterize rank-dependent utility with power and exponential weighting functions. Moreover, by allowing probabilistic risk attitudes to vary within the probability interval, a preference foundation for rank-dependent utility with parametric inverse-S shaped weighting function is obtained. {\textcopyright} 2008 Elsevier Inc. All rights reserved.",

keywords = "Comonotonic independence, Preference foundation, Probability weighting function, Rank-dependent utility",

author = "Enrico Diecidue and Ulrich Schmidt and Horst Zank",

year = "2009",

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AU - Diecidue, Enrico

AU - Schmidt, Ulrich

AU - Zank, Horst

PY - 2009/5

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AB - This paper provides preference foundations for parametric weighting functions under rank-dependent utility. This is achieved by decomposing the independence axiom of expected utility into separate meaningful properties. These conditions allow us to characterize rank-dependent utility with power and exponential weighting functions. Moreover, by allowing probabilistic risk attitudes to vary within the probability interval, a preference foundation for rank-dependent utility with parametric inverse-S shaped weighting function is obtained. © 2008 Elsevier Inc. All rights reserved.

KW - Comonotonic independence

KW - Preference foundation

KW - Probability weighting function

KW - Rank-dependent utility

U2 - 10.1016/j.jet.2008.10.004

DO - 10.1016/j.jet.2008.10.004

M3 - Article

SN - 0022-0531

VL - 144

SP - 1102

EP - 1118

JO - Journal of Economic Theory

JF - Journal of Economic Theory

IS - 3

ER -

Parametric weighting functions

Abstract

Keywords

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