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In this article, we test Green and Jullien's (1988) Ordinal Independence (OI) Axiom, an axiom necessary for any rank-dependent expected utility (RDEU) model, including Cumulative Prospect Theory (Tversky and Kahneman, 1992). We observe systematic violations of OI (some within-subject violation...
Persistent link: https://www.econbiz.de/10005709664
We generalize the Allais common consequence effect by describing three common consequence effect conditions and characterizing their implications for the probability weighting function in rank-dependent expected utility. The three conditions--horizontal, vertical, and diagonal shifts within the...
Persistent link: https://www.econbiz.de/10005809666
Persistent link: https://www.econbiz.de/10008552550
The two versions of prospect theory, original prospect theory (OPT; Kahneman and Tversky, 1979) and cumulative prospect theory (CPT; Tversky and Kahneman, 1992), use different composition rules to combine the value function and the probability weighting function and hence value gambles with two...
Persistent link: https://www.econbiz.de/10005678191