A TEST OF RANK-DEPENDENT UTILITY IN THE CONTEXT OF AMBIGUITY

Citation
H. Fennema et P. Wakker, A TEST OF RANK-DEPENDENT UTILITY IN THE CONTEXT OF AMBIGUITY, Journal of risk and uncertainty, 13(1), 1996, pp. 19-35
Citations number
23
Categorie Soggetti
Economics,"Business Finance
ISSN journal
08955646
Volume
13
Issue
1
Year of publication
1996
Pages
19 - 35
Database
ISI
SICI code
0895-5646(1996)13:1<19:ATORUI>2.0.ZU;2-T
Abstract
Experimental investigations of non-expected utility have primarily con centrated on decision under risk (''probability triangles''). The lite rature suggests, however, that ambiguity is one of the main causes for deviations from expected utility (EU). This article investigates the descriptive performance of rank-dependent utility (RDU) in the context of choice under ambiguity. We use the axiomatic difference between RD U and EU to critically test RDU against EU. Surprisingly, the RDU mode l does not provide any descriptive improvement over EU. Our data sugge st other ''framing'' factors that do provide descriptive improvements over EU.