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Nonlinear Utility Theory and Prospect Theory: Eliminating the Paradoxes of Linear Expected Utility Theory

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Foundations of Economic Psychology

Abstract

As introduced in the previous chapter, expected utility theory has counter-examples called theAllais paradox (Allais, 1953) and Ellsberg’s paradox (Ellsberg, 1961), and we know that these counter-examples are related to independence axioms.

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Authors and Affiliations

  1. Department of Psychology, Waseda University, Tokyo, Japan

    Kazuhisa Takemura

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  1. Kazuhisa Takemura
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Correspondence to Kazuhisa Takemura .

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Takemura, K. (2019). Nonlinear Utility Theory and Prospect Theory: Eliminating the Paradoxes of Linear Expected Utility Theory. In: Foundations of Economic Psychology. Springer, Singapore. https://doi.org/10.1007/978-981-13-9049-4_4

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