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Title:
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Resolving Inconsistencies in Utility Measurement under Risk: Tests of Generalizations of Expected Utility
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Author:
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Bleichrodt, Han; Abellán Perpiñán, José María; Pinto Prades, José Luis; Méndez, Ildefonso
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Other authors:
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Universitat Pompeu Fabra. Departament d'Economia i Empresa |
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Abstract:
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This paper explores biases in the elicitation of utilities under risk and the contribution that generalizations of expected utility can make to the resolution of these biases. We used five methods to measure utilities under risk and found clear violations of expected utility. Of the theories studies, prospect theory was most consistent with our data. The main improvement of prospect theory over expected utility was in comparisons between a riskless and a risky prospect(riskless-risk methods). We observed no improvement over expected utility in comparisons between two risky prospects (risk-risk methods). An explanation why we found no improvement of prospect theory over expected utility in risk-risk methods may be that there was less overweighting of small probabilities in our study than has commonly been observed. |
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Publication date:
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2005-09-15 |
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Subject(s):
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Utility Measurement, Nonexpected Utility, Prospect Theory, Health. |
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Rights:
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Aquest document està subjecte a una llicència d'ús de Creative Commons, amb la qual es permet copiar, distribuir i comunicar públicament l'obra sempre que se'n citin l'autor original, la universitat i el departament i no se'n faci cap ús comercial ni obra derivada, tal com queda estipulat en la llicència d'ús (http://creativecommons.org/licenses/by-nc-nd/2.5/es/) |
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Document type:
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Working Paper |
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