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29
Advances in Prospect Theory: Cumulative Representation of Uncertainty
 JOURNAL OF RISK AND UNCERTAINTY, 5:297323 (1992)
, 1992
"... We develop a new version of prospect theory that employs cumulative rather than separable decision weights and extends the theory in several respects. This version, called cumulative prospect theory, applies to uncertain as well as to risky prospects with any number of outcomes, and it allows differ ..."
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We develop a new version of prospect theory that employs cumulative rather than separable decision weights and extends the theory in several respects. This version, called cumulative prospect theory, applies to uncertain as well as to risky prospects with any number of outcomes, and it allows different weighting functions for gains and for losses. Two principles, diminishing sensitivity and loss aversion, are invoked to explain the characteristic curvature of the value function and the weighting functions. A review of the experimental evidence and the results of a new experiment confirm a distinctive fourfold pattern of risk attitudes: risk aversion for gains and risk seeking for losses of high probability; risk seeking for gains and risk aversion for losses of low probability.
A BEHAVIORAL FOUNDATION FOR FUZZY MEASURES
, 1990
"... In Savage [41] a 'behavioral foundation' was given for subjective probabilities, to be used in the maximization of expected utility. This paper analogously gives a behavioral foundation for fuzzy measures, to be used in the maximization of 'Choquetexpected utility'. This opens ..."
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In Savage [41] a 'behavioral foundation' was given for subjective probabilities, to be used in the maximization of expected utility. This paper analogously gives a behavioral foundation for fuzzy measures, to be used in the maximization of 'Choquetexpected utility'. This opens the way to empirical verification or falsification of fuzzy measures, and frees them of their 'ad hoc' character.
States of the World and the State of Decision Theory
 The Economics of Risk, W. E. Upjohn Institute for Economic Research
, 2003
"... thank Ted Groves, Donald Meyer and Joel Sobel for helpful comments. This material is based upon work supported by the National Science ..."
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thank Ted Groves, Donald Meyer and Joel Sobel for helpful comments. This material is based upon work supported by the National Science
Stochastically independent randomization and uncertainty aversion.
 Economic Theory , 18 ,
, 2001
"... Summary. This paper proposes a preferencebased condition for stochastic independence of a randomizing device in a product state space. This condition is applied to investigate some classes of preferences that allow for both independent randomization and uncertainty or ambiguity aversion (a la Ells ..."
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Summary. This paper proposes a preferencebased condition for stochastic independence of a randomizing device in a product state space. This condition is applied to investigate some classes of preferences that allow for both independent randomization and uncertainty or ambiguity aversion (a la Ellsberg). For example, when imposed on Choquet Expected Utility (CEU) preferences in a Savage framework displaying uncertainty aversion in the spirit of Schmeidler [27], it results in a collapse to Expected Utility (EU). This shows that CEU preferences that are uncertainty averse in the sense of Schmeidler should not be used in settings where independent randomization is to be allowed. In contrast, Maxmin EU with multiple priors preferences continue to allow for a very wide variety of uncertainty averse preferences when stochastic independence is imposed. Additionally, these points are used to reexamine some recent arguments against preference for randomization with uncertainty averse preferences. In particular, these arguments are shown to rely on preferences that do not treat randomization as a stochastically independent event.
Choquet Rationality
, 1999
"... We provide a characterization of the consequences of the assumption that a decision maker with a given utility function is Choquet rational : She maximizes expected utility, but possibly with respect to nonadditive beliefs, so that her preferences are represented by Choquet expected utility (CEU). ..."
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We provide a characterization of the consequences of the assumption that a decision maker with a given utility function is Choquet rational : She maximizes expected utility, but possibly with respect to nonadditive beliefs, so that her preferences are represented by Choquet expected utility (CEU). The characterization shows that this notion of rationality allows in general to rationalize more choices than it is possible when beliefs have to be additive. More surprisingly, we find that a considerable restriction on the types of beliefs allowed does not change the set of rational actions. We then remark on the relation between the predictions of CEU model, of a similar model (the maxmin expected utility model), and those of subjective expected utility when the risk attitude of the decision maker is not known. We close with an application of the result to the definition of a solution concept (in the spirit of rationalizability) for strategicform games.
A note on Wakker’s cardinal coordinate independence
 Mathematical Social Sciences
, 2004
"... 1We wish to thank Peter Wakker for his detailed comments on an earlier draft ..."
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1We wish to thank Peter Wakker for his detailed comments on an earlier draft
A Theory of Coarse Utility
 JOURNAL OF RISK AND UNCERTAINTY, 11:1749 (1995)
, 1995
"... This article presents a descriptive theory for complex choice problems. In line with the bounded rationality assumption, we hypothesize that decision makers modify a complex choice into some coarse approximations, each of which is a binary lottery. We define the value of a best coarse approximation ..."
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Cited by 4 (2 self)
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This article presents a descriptive theory for complex choice problems. In line with the bounded rationality assumption, we hypothesize that decision makers modify a complex choice into some coarse approximations, each of which is a binary lottery. We define the value of a best coarse approximation to be the utility of the choice. Using this paradigm, we axiomatize and justify a new utility function called the coarse utility function. We show that the coarse utility function approximates the rank and signdependent utility function. It satisfies dominance but admits violations of independence. It reduces judgmental load and allows flexible judgmental information. It accommodates phenomena associated with probability distortions and provides a better esolution to the St. Petersburg paradox than the expected and rankdependent theories. Key words: decision analysis, utility theory, coarse utility function, rankdependent utilities Complexity lies deep in the nature of things. Discovering tolerable approximation procedures and heuristics lies at the heart of human intelligence (Simon, 1978). This article presents a descriptive theory of complex decision problems. In line with the bounded rationality assumption (Simon, 1955), we hypothesize that decision makers (DMs) view complex choices approximately. We argue that DMs may not attend to all the outcomes
Subjective expected utility without preferences
, 2010
"... This paper shows that subjective expected utility can be obtained using primitives that are much poorer than a preference relation on the set of acts. Our primitives only involve the fact that an act is judged either “attractive” or “unattractive”. We give conditions implying that there are a utilit ..."
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This paper shows that subjective expected utility can be obtained using primitives that are much poorer than a preference relation on the set of acts. Our primitives only involve the fact that an act is judged either “attractive” or “unattractive”. We give conditions implying that there are a utility function on the set of consequences and a probability distribution on the set of states such that attractive acts have a subjective expected utility above some threshold. The numerical representation that is obtained has strong
Consistent dynamic choice and non expected utility preferences”, DT Greqam
, 2007
"... preferences ..."