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- Rank-dependent_expected_utility abstract "The rank-dependent expected utility model (originally called anticipated utility) is a generalized expected utility model of choice under uncertainty, designed to explain the behaviour observed in the Allais paradox, as well as for the observation that many people both purchase lottery tickets (implying risk-loving preferences) and insure against losses (implying risk aversion).A natural explanation of these observations is that individuals overweight low-probability events such as winning the lottery, or suffering a disastrous insurable loss. In the Allais paradox, individuals appear to forgo the chance of a very large gain to avoid a one per cent chance of missing out on an otherwise certain large gain, but are less risk averse when offered the chance of reducing an 11 per cent chance of loss to 10 per cent.A number of attempts were made to model preferences incorporating probability theory, most notably the original version of prospect theory, presented by Daniel Kahneman and Amos Tversky (1979). However, all such models involved violations of first-order stochastic dominance. In prospect theory, violations of dominance were avoided by the introduction of an 'editing' operation, but this gave rise to violations of transitivity.The crucial idea of rank-dependent expected utility was to overweight only unlikely extreme outcomes, rather than all unlikely events. Formalising this insight required transformations to be applied to the cumulative probability distribution function, rather than to individual probabilities (Quiggin, 1982, 1993).The central idea of rank-dependent weightings was then incorporated by Daniel Kahneman and Amos Tversky into prospect theory, and the resulting model was referred to as cumulative prospect theory (Tversky & Kahneman, 1992).".
- Rank-dependent_expected_utility wikiPageID "6294571".
- Rank-dependent_expected_utility wikiPageLength "3416".
- Rank-dependent_expected_utility wikiPageOutDegree "16".
- Rank-dependent_expected_utility wikiPageRevisionID "542712746".
- Rank-dependent_expected_utility wikiPageWikiLink Allais_paradox.
- Rank-dependent_expected_utility wikiPageWikiLink Amos_Tversky.
- Rank-dependent_expected_utility wikiPageWikiLink Category:Utility.
- Rank-dependent_expected_utility wikiPageWikiLink Cumulative_prospect_theory.
- Rank-dependent_expected_utility wikiPageWikiLink Daniel_Kahneman.
- Rank-dependent_expected_utility wikiPageWikiLink Favourite-longshot_bias.
- Rank-dependent_expected_utility wikiPageWikiLink Generalized_expected_utility.
- Rank-dependent_expected_utility wikiPageWikiLink John_Quiggin.
- Rank-dependent_expected_utility wikiPageWikiLink Prospect_theory.
- Rank-dependent_expected_utility wikiPageWikiLink Risk-loving.
- Rank-dependent_expected_utility wikiPageWikiLink Risk-seeking.
- Rank-dependent_expected_utility wikiPageWikiLink Risk_aversion.
- Rank-dependent_expected_utility wikiPageWikiLink Stochastic_dominance.
- Rank-dependent_expected_utility wikiPageWikiLink Transitive_relation.
- Rank-dependent_expected_utility wikiPageWikiLink Uncertainty.
- Rank-dependent_expected_utility wikiPageWikiLinkText "Rank-dependent expected utility".
- Rank-dependent_expected_utility wikiPageWikiLinkText "rank-dependent expected utility".
- Rank-dependent_expected_utility wikiPageWikiLinkText "rank-dependent utility theory".
- Rank-dependent_expected_utility hasPhotoCollection Rank-dependent_expected_utility.
- Rank-dependent_expected_utility subject Category:Utility.
- Rank-dependent_expected_utility hypernym Model.
- Rank-dependent_expected_utility type Person.
- Rank-dependent_expected_utility type Concept.
- Rank-dependent_expected_utility comment "The rank-dependent expected utility model (originally called anticipated utility) is a generalized expected utility model of choice under uncertainty, designed to explain the behaviour observed in the Allais paradox, as well as for the observation that many people both purchase lottery tickets (implying risk-loving preferences) and insure against losses (implying risk aversion).A natural explanation of these observations is that individuals overweight low-probability events such as winning the lottery, or suffering a disastrous insurable loss. ".
- Rank-dependent_expected_utility label "Rank-dependent expected utility".
- Rank-dependent_expected_utility sameAs m.0f_rhv.
- Rank-dependent_expected_utility sameAs Q7293196.
- Rank-dependent_expected_utility sameAs Q7293196.
- Rank-dependent_expected_utility wasDerivedFrom Rank-dependent_expected_utility?oldid=542712746.
- Rank-dependent_expected_utility isPrimaryTopicOf Rank-dependent_expected_utility.