English, Article, Journal or magazine article edition: Resolving Inconsistencies in Utility Measurement under Risk: Tests of Generalizations of Expected Utility José María Abellán-Perpiñan; JoséLuis Pinto; Han Bleichrodt; ...

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Bookmark: http://trove.nla.gov.au/version/155328
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Resolving Inconsistencies in Utility Measurement under Risk: Tests of Generalizations of Expected Utility
Author
  • José María Abellán-Perpiñan
  • JoséLuis Pinto
  • Han Bleichrodt
  • Jose María Abellán Perpiñán
  • Jose Luis Pinto-Prades
  • Ildefonso Méndez-Martínez
Physical Description
  • preprint
Notes
  • 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.
  • Utility Measurement, Nonexpected Utility, Prospect Theory, Health., Leex
  • RePEc:upf:upfgen:798
  • This paper explores inconsistencies that occur in utility measurement under risk when expected utility is assumed and the contribution that prospect theory and some other generalizations of expected utility can make to the resolution of these inconsistencies. We used five methods to measure utilities under risk and found clear violations of expected utility. Of the theories studied, prospect theory was the 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 for the latter observation may be that there was less distortion in probability weighting in the interval [0.10, 0.20] than has commonly been observed.
  • RePEc:pab:wpaper:06.19
Language
  • English
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