, Volume 71, Issue 3, pp 431-438
Date: 07 Sep 2010

Empirical rules of thumb for choice under uncertainty

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Abstract

A substantial body of empirical evidence shows that individuals overweight extreme events and act in conflict with the expected utility theory. These findings were the primary motivation behind the development of a rank-dependent utility theory for choice under uncertainty. The purpose of this paper is to demonstrate that some simple empirical rules of thumb for choice under uncertainty are consistent with the rank-dependent utility theory.