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The Handbook of Rational and Social Choice$
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Paul Anand, Prasanta Pattanaik, and Clemens Puppe

Print publication date: 2009

Print ISBN-13: 9780199290420

Published to Oxford Scholarship Online: May 2009

DOI: 10.1093/acprof:oso/9780199290420.001.0001

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Rank‐Dependent Utility *

Rank‐Dependent Utility *

Chapter:
(p.69) CHAPTER 2 RANK‐DEPENDENT UTILITY*
Source:
The Handbook of Rational and Social Choice
Author(s):

Mohammed Abdellaoui

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199290420.003.0003

Rank‐dependent utility (RDu) is among the most popular generalizations of the standard model of expected utility. It takes into account the main violations of expected utility (Allais paradox, Ellsberg paradox). Furthermore, the replacement of probabilities by decision weights allows us to capture what may be called “chance attitude” in addition to attitude towards outcomes. This chapter aims to bring into focus the main violations of expected utility that opened the way to rank‐dependent utility. Then, it presents the main preference conditions behind rankdependence. The chapter concludes with a few experimental results as regards the elicitation of cumulative prospect theory, the most compelling version of Rank‐dependent utility.

Keywords:   expected Utility, risk, uncertainty, rankdependence, decision weights, Choquet expected utility, cumulative prospect theory

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