Using Descriptive Findings of Prospect Theory to Improve Prescriptive Applications of Expected Utility

@inproceedings{Wakker1999UsingDF,
title={Using Descriptive Findings of Prospect Theory to Improve Prescriptive Applications of Expected Utility},
author={Peter P. Wakker},
year={1999}
}

This paper proposes a quantitative modification of standard utility measurement procedures, such as the probability and certainty equivalence methods, to correct for commonly observed violations of expected utility. Traditionally, decision analysis assumes expected utility not only for the prescriptive purpose of calculating optimal decisions but also for the descriptive purpose of analyzing subjects’ behavior in utility measurements. However, descriptive violations of expected utility have… CONTINUE READING