Abstract
Cumulative prospect theory introduced the weighting of probabilities as an additional component to capture risk attitudes. However, this addition would be a less significant challenge to expected utility theory (EU) if utility curvature and probability weighting showed strong positive correlation. In that case the utility curvature in EU alone, although not properly describing risky behavior in general, would still capture most of the variance of individual risk aversion. This study provides experimental evidence that such a strong and positive correlation does not exist. Although most individuals exhibit concave utility and convex probability weighting, the two components show no strong positive correlation. This paper was accepted by Peter Wakker, decision analysis.
| Item Type: | Journal article |
|---|---|
| Keywords: | risk attitude; cumulative prospect theory; experimental study |
| Faculties: | Economics > Chairs > Munich Graduate School of Economics |
| Subjects: | 300 Social sciences > 330 Economics |
| Language: | English |
| Item ID: | 20868 |
| Date Deposited: | 05. Nov 2014, 07:11 |
| Last Modified: | 23. Aug 2017, 14:00 |
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