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Cardinalism pp 233-248 | Cite as

Filtering Risk Effect in Standard-Gamble Utility Measurement

Chapter
Part of the Theory and Decision Library book series (TDLA, volume 19)

Abstract

Cardinal utility functions measured via the midpoint-sequence expected utility (MSEU) method have often been found incoherent because of the risk effect — that part of an individual’s risk attitude which is inadmissible within the expected utility theory. In order to filter the risk effect, we propose a midpoint-sequence weighted-utility (MSWU) method. It employs a one-parameter utility model suggested by Professor Ole Hagen some two decades ago as a parsimonious descriptor of preferences for two-outcome even-chance gambles. The empirical evidence in support of the model is recounted, but a direct validation of the MSWU method awaits further research.

Keywords

Utility Function Risk Attitude Risk Effect Expected Utility Theory Certainty Equivalent 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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References

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Copyright information

© Springer Science+Business Media Dordrecht 1994

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