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Parametric weighting functions |
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| Authors: | Enrico Diecidue Horst Zank |
| Institution: | a Decision Sciences Area, INSEAD, Fontainebleau, France b Christian-Albrechts-Universität zu Kiel, Germany c Kiel Institute for the World Economy, Germany d Economics, School of Social Sciences, The University of Manchester, Oxford Road, Manchester M13 9PL, United Kingdom |
| Abstract: | This paper provides preference foundations for parametric weighting functions under rank-dependent utility. This is achieved by decomposing the independence axiom of expected utility into separate meaningful properties. These conditions allow us to characterize rank-dependent utility with power and exponential weighting functions. Moreover, by allowing probabilistic risk attitudes to vary within the probability interval, a preference foundation for rank-dependent utility with parametric inverse-S shaped weighting function is obtained. |
| Keywords: | D81 |
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