Reasons for Rank-dependent Utility Evaluation

Elke U. Weber, Britt Kirsner

Research output: Contribution to journalArticle

42 Scopus citations

Abstract

Three reasons for why people may evaluate utility in a rank-dependent fashion have been suggested: (a) rank-dependent weighting is a function of perceptual biases and thus not prescriptively defensible; (b) weights are (re)distributed by motivational processes that reflect stable personality characteristics of the decision maker; and (c) weights are (re)distributed as a function of the situation, allowing rank-dependent evaluation to be a rational response to an environment with asymmetric loss functions. By modifying a study by Wakker, Erev, and Weber (1994) we show that all three processes - that is, perceptual biases, individual predispositions in weighting, as well as rational adaptation to an asymmetric loss function - can be involved in rank-dependent weighting.

Original languageEnglish (US)
Pages (from-to)41-61
Number of pages21
JournalJournal of Risk and Uncertainty
Volume14
Issue number1
DOIs
StatePublished - Jan 1 1997

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

Keywords

  • Comonotonic independence
  • Expected utility
  • Independence
  • Preference reversals
  • Rank-dependent utility

Fingerprint Dive into the research topics of 'Reasons for Rank-dependent Utility Evaluation'. Together they form a unique fingerprint.

  • Cite this