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Journal of Risk and Uncertainty

, Volume 28, Issue 1, pp 55–71 | Cite as

A Note on Luce-Fishburn Axiomatization of Rank-Dependent Utility

  • Liping Liu
Article

Abstract

In this paper, I provide a new axiomatization for rank-dependent utilities. I show that, along with weak order, dominance, and the binary rank-dependent representation, the decomposition of certainty equivalents is sufficient to derive the general rank-dependent model of Luce and Fishburn (1991, 1995). My axiomatization not only simplifies and generalizes the theory proposed by Luce and Fishburn (1991, 1995) but also is more empirically appealing. The result is comparable to that obtained by Quiggin (1982) in the sense that both involve a sort of decomposition of certainty equivalents and both do not use compound lotteries. However, my axiomatization does not have the restriction that the weight of probability 1/2 is 1/2.

utility theory rank-dependent utility axiomatization 

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Copyright information

© Kluwer Academic Publishers 2004

Authors and Affiliations

  • Liping Liu
    • 1
  1. 1.College of Business AdministrationUniversity of AkronAkronUSA

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