Lottery Decisions and Probability Weighting Function
Posted: 15 Oct 2001
Abstract
This article analyzes the implications of basic lottery tests for the probability weighting function w(p). We first show that the w(p) function with one argument cannot accommodate three basic tests of lottery choice. We also discuss in detail the links between the w(p) function with one argument and the preference reversal paradox. In the last section we propose an evaluation function that accommodates the restrictions imposed by the tests and we provide an example of such function.
JEL Classification: D80
Suggested Citation: Suggested Citation
Alarie, Yves and Dionne, Georges, Lottery Decisions and Probability Weighting Function. Available at SSRN: https://ssrn.com/abstract=263779
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