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2010 | nr 25 | 609-632
Tytuł artykułu

Lottery Valuation Using the Relative Utility (Aspiration) Function

Warianty tytułu
Języki publikacji
EN
Abstrakty
EN
The paper presents a method for lottery valuation using the relative utility function, which resembles the utility curve proposed by Markowitz (1952a). The paper discusses lotteries with discrete and continuous outcome distributions as well as lotteries with positive, negative and mixed outcomes. The solution is similar to the Expected Utility Theory approach and does not use the probability weighting function. Solutions to several classical behavioral problems, including the Allais paradox, are presented, demonstrating that the method can be used for valuing lotteries even in more complex cases of outcomes described by a combination of Beta distributions.(original abstract)
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Twórcy
  • Artal Investments
Bibliografia
  • Allais M. (1953): Le comportement de l'homme rationnel devant le risque: critique des postulats etaxiomes de l'école Américaine. Econometrica 21, 503-546.
  • Bernoulli D. (1738), translated by Dr. Lousie Sommer. (January 1954). Exposition of a New Theory on the Measurement of Risk. Econometrica 22 (1): 22-36. doi:10.2307/1909829. http://www.math. fau.edu/richman/Ideas/daniel.htm.
  • Cramer G. (1728): A letter to Nicolas Bernoulli, May 21, 1728, http://www.cs.xu.edu/math/ Sources/Montmort/stpetersburg.pdf/
  • Edwards W. (1961): Behavioral Decision Theory. Ann. Rev. Psych., 12, 473-479.
  • Handa J. (1977): Risk, Probabilities, and a New Theory of Cardinal Utility. Journal of Political Economy, Vol. 85, No 1, 97-122.
  • Kahneman D., Tversky A. (1979): Prospect theory: An analysis of decisions under risk. Econometrica,47, 313-327.
  • Kontek K. (2009a): On Mental ransformations. MPRA Paper http://mpra.ub.uni-muenchen.de/16516/,Available at SSRN: http://ssrn.com/abstract=1437722.
  • Kontek K. (2009b): Absolute vs Relative Notion of Wealth Changes. MPRA Paper http://mpra.ub.unimuenchen. de/17336/, Available at SSRN: http://ssrn.com/abstract=1474229.
  • Kumaraswamy P. (1980): A generalized probability density function for double-bounded random processes. Journal of Hydrology 46: 79-88. doi:10.1016/0022-1694(80)90036-0.
  • Markowitz H. (1952A): The Utility of Wealth. Journal of Political Economy, Vol. 60, 151-158.
  • Markowitz H. (1952B): Portfolio Selection, Journal of Finance, 7(1), 77-91.
  • Markowitz H. (1959): Portfolio Selection, Efficient Diversification of Investments. John Willey, New York.
  • von Neumann J., Morgenstern O. (1944): Theory of Games and Economic Behavior, Princeton University Press.
  • Quiggin J. (1982): A theory of anticipated utility, Journal of Economic Behavior and Organization 3(4), 323-43.
  • Prelec D. (1998): The Probability Weighting Function, Econometrica, 66:3 (May), 497-527.
  • Savage L.J. (1954): The Foundations of Statistics, John Wiley and Sons, New York.
  • Tversky A., Kahneman D. (1992): Advances in Prospect Theory: Cumulative Representation of Uncertainty,Journal of Risk and Uncertainty, vol. 5(4), October, 297-323.
  • Wakker P. (1989): Continuous subjective expected utility with non-additive probabilities, Journal of Mathematical Economics, Elsevier, vol. 18(1), 1-27, February.
  • Williams C.A. Jr. (1966): Attitudes toward Speculative Risks as an Indicator of Attitudes toward Pure Risks, Journal of Risk and Insurance 33(4), 577-586.
Typ dokumentu
Bibliografia
Identyfikatory
Identyfikator YADDA
bwmeta1.element.ekon-element-000171247947
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