Abstract
This article extends Karni's (1992) Utility Theory with Probability Dependent Outcome Valuation (UTP-DOV) to accommodate a wider set of preferences, and applies the new representation to a variety of decision problems under risk. First, we present a new, more general, axiomatization of UTPDOV that renders the underlying intuition more transparent. Second, we develop sufficient conditions under which UTPDOV satisfies the betweenness and the ordinal independence axioms. Finally, we examine functional forms of the UTPDOV model that are consistent with several well known departures from the independence axiom.
Original language | English (US) |
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Pages (from-to) | 127-142 |
Number of pages | 16 |
Journal | Journal of Risk and Uncertainty |
Volume | 10 |
Issue number | 2 |
DOIs | |
State | Published - Mar 1995 |
Keywords
- Allais paradox
- Bergen paradox
- betweenness
- nonexpected utility theory
- ordinal independence
- probability dependent outcome valuation
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics