Rank- and sign-dependent linear utility models for finite first-order gambles (Q1180524)

This article gives a relatively simple axiomatization of the theory of preferences among uncertain alternatives that makes an explicit distribution between gains and losses and that generalized both prospect theory and rank-dependent theory. The axiomatization rests critically on having, in addition to the structure of gambles, an operation of joint receipt, which allows explicit editing of gambles. That editing process, which proceeds inductively being with the consequences closest to the status quo, is the source of the rank-dependence in the domain both of all joins and losses. The major source of nonrationality in the theory is the assumption that a gamble of gains and losses is treated as the joint receipt of two gambles, one being the gains pitted against no change from the status quo and the other of the losses pitted against no change from the status quo.