Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/56849 
Year of Publication: 
2010
Series/Report no.: 
Jena Economic Research Papers No. 2010,053
Publisher: 
Friedrich Schiller University Jena and Max Planck Institute of Economics, Jena
Abstract: 
Cumulative Prospect Theory (PT) introduced the weighting of probabilities as an additional component to capture risk attitudes. However, this addition would be a less significant challenge to expected utility theory (EU) if utility curvature and probability weighting showed strong positive correlation. In that case the utility curvature in EU alone, while not properly describing risky behavior in general, would still capture most of the variance of individual risk aversion. This study provides experimental evidence that such a strong and positive correlation does not exist. Although most individuals exhibit concave utility and convex probability weighting, the two components show no strong positive correlation.
Subjects: 
risk attitudes
cumulative prospect theory
experimental study
JEL: 
C91
D81
Document Type: 
Working Paper

Files in This Item:
File
Size
586.55 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.