Gains and Losses in Nonadditive Expected Utility
This paper provides a simple approach for deriving cumulative prospect theory. The key axiom is a cumulative dominance axiom which requires that a prospect be judged more attractive if in it greater gains are more likely and greater losses are less likely. In the presence of this cumulative dominance, once a model is satisfied on a "sufficiently rich" domain, then it holds everywhere. This leads to highly transparent results.
|decision making, rationality, risk, utility theory|
|Kluwer Academic Publishers, Dordrecht etc.|
|Organisation||Erasmus School of Economics|
Sarin, R.K, & Wakker, P.P. (1994). Gains and Losses in Nonadditive Expected Utility. Kluwer Academic Publishers, Dordrecht etc. Retrieved from http://hdl.handle.net/1765/23188