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Title:The certainty effect and boundary effects with transformed probabilities
Authors:Schmidt, Ulrich
Issue Date:2000
Citation:[Volume:] 67 [Issue:] 1 [Pages:] 29-33 [Journal:] Economics letters [ISBN:] 0165-1765
Abstract:Prospect theory and rank-dependent utility are nowadays the most prominent descriptive models of decision making under risk. Both theories rely on the notion that probabilities are transformed into decision weights. This paper proposes two particular hypotheses of decision weights which underweight all probabilities less than unity. Interestingly, these two hypotheses lead to special cases of a class of models which have been developed to accommodate the certainty effect and boundary effects but have not been related to transformed probabilities before.
Subjects:Certainty effect
Boundary effects
Decision weights
JEL:D81
C91
Persistent Identifier of the first edition:doi:10.1016/S0165-1765(99)00247-5
Document Type:Article
Appears in Collections:Economists Online

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