On the potential for observational equivalence in experiments on risky choice when a power value function is assumed

We demonstrate theoretically and illustrate the implications of assuming power utility when the true function is of the expo-power form. Empirical results can appear to be consistent with cumulative prospect theory when they are in fact generated from a Markowitz model.

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Year of publication:	2012
Authors:	Peel, D.A. ; Zhang, Jie
Published in:	Economics Letters. - Elsevier, ISSN 0165-1765. - Vol. 116.2012, 1, p. 8-10
Publisher:	Elsevier
Subject:	Cumulative prospect theory \| Power value function \| Markowitz model \| Expo-value utility function \| Probability distortion \| Lotteries

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Type of publication:	Article
Classification:	C72 - Noncooperative Games ; C92 - Laboratory; Group Behavior ; D80 - Information and Uncertainty. General ; D84 - Expectations; Speculations
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010572248