Theory and Decision 50 (1):35-58 (2001)
AbstractIn order to accommodate empirically observed violations of the independence axiom of expected utility theory Becker and Sarin (1987) proposed their model of lottery dependent utility in which the utility of an outcome may depend on the lottery being evaluated. Although this dependence is intuitively very appealing and provides a simple functional form of the resulting decision criterion, lottery dependent utility has been nearly completely neglected in the recent literature on decision making under risk. The goal of this paper is to revive the lottery dependent utility model. Therefore, we derive first a sound axiomatic foundation of lottery dependent utility. Secondly, we develop a discontinuous variant of the model which can accommodate boundary effects and may lead to a lexicographic non-expected utility model. Both analyses are accompanied by considering some functional specifications which are in accordance with recent experimental results and may have significant applications in business and management science
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References found in this work
Security Level, Potential Level, Expected Utility: A Three-Criteria Decision Model Under Risk.MichÈle Cohen - 1992 - Theory and Decision 33 (2):101.
Choice Under Risk and the Security Factor: An Axiomatic Model.Jean-Yves Jaffray - 1988 - Theory and Decision 24 (2):169.
Citations of this work
Applying the Benchmarking Procedure: A Decision Criterion of Choice Under Risk. [REVIEW]Francesca Beccacece & Alessandra Cillo - 2006 - Theory and Decision 61 (1):75-91.
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