Theory and Decision

, Volume 71, Issue 3, pp 431–438 | Cite as

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.

Keywords

Rank-dependent utility Maximin Maximax Mid-range 

JEL Classification

D81 

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Copyright information

© Springer Science+Business Media, LLC. 2010

Authors and Affiliations

  1. 1.Research DepartmentStatistics NorwayOsloNorway

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