Theory and Decision

, Volume 71, Issue 3, pp 431–438

Empirical rules of thumb for choice under uncertainty

Authors

    • Research DepartmentStatistics Norway
Article

DOI: 10.1007/s11238-010-9230-7

Cite this article as:
Aaberge, R. Theory Decis (2011) 71: 431. doi:10.1007/s11238-010-9230-7
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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.

Keywords

Rank-dependent utilityMaximinMaximaxMid-range

JEL Classification

D81

Copyright information

© Springer Science+Business Media, LLC. 2010