Journal of Risk and Uncertainty

, Volume 22, Issue 1, pp 21–33 | Cite as

Lottery Decisions and Probability Weighting Function

  • Yves Alarie
  • Georges Dionne
Article

Abstract

This article analyzes the implications of basic lottery tests for the probability weighting function w(p). We first show that the w(p) function with one argument cannot accommodate three basic tests of lottery choice. We also discuss in detail the links between the w(p) function with one argument and the preference reversal paradox. In the last section we propose an evaluation function that accommodates the restrictions imposed by the tests and we provide an example of such function.

probability weighting function w(pstandard tests for lottery choices regressive function tests pricing of lotteries 

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Copyright information

© Kluwer Academic Publishers 2001

Authors and Affiliations

  • Yves Alarie
    • 1
  • Georges Dionne
    • 2
  1. 1.Centre de recherche sur les transportsUniversité de MontréalSucc. Centre-Ville, Montreal
  2. 2.HEC-MontrealMontreals

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