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Risk Attitudes and Decision Weights

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  • Tversky, Amos
  • Wakker, Peter

Abstract

To accommodate the observed pattern of risk-aversion and risk-seeking, as well as common violations of expected utility (e.g., the certainty effect), the authors introduce and characterize a weighting function according to which an event has greater impact when it turns impossibility into possibility, or possibility into certainty, than when it merely makes a possibility more or less likely. The authors show how to compare such weighting functions (of different individuals) with respect to the degree of departure from expected utility and they present a method for comparing an individual's weighting functions for risk and for uncertainty. Copyright 1995 by The Econometric Society.

Suggested Citation

  • Tversky, Amos & Wakker, Peter, 1995. "Risk Attitudes and Decision Weights," Econometrica, Econometric Society, vol. 63(6), pages 1255-1280, November.
    • Handle: RePEc:ecm:emetrp:v:63:y:1995:i:6:p:1255-80
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