Binary gambles of a gain and a loss: an understudied domain

Authors
Citation
Rd. Luce, Binary gambles of a gain and a loss: an understudied domain, J ECON, 1999, pp. 181-202
Citations number
57
Categorie Soggetti
Economics
Journal title
JOURNAL OF ECONOMICS-ZEITSCHRIFT FUR NATIONALOKONOMIE
ISSN journal
09318658 → ACNP
Year of publication
1999
Supplement
8
Pages
181 - 202
Database
ISI
SICI code
0931-8658(1999):<181:BGOAGA>2.0.ZU;2-H
Abstract
Assume that binary rank-dependent expected utility (subjective expected uti lity is a special case) holds for gains and losses separately and that a co mmutative binary operation of joint receipt on consequences and gambles is linked to binary gambles via the rational property of segregation. This imp lies that utility U of joint receipt is either itself additive or is an exp onential transformation of an additive representation V. For joint receipt of mixed gains and losses two hypotheses are discussed: either U or V is ad ditive over mixed joint receipts. Both hypotheses are linked back to gamble s in two different ways: a generalization of segregation and an empirically sustained but nonrational property called duplex decomposition. The additi ve U model yields bilinear expressions like rank-dependent expected utility . Data favor the latter. The additive V models yield nonbilinear representa tions of mixed gambles.