Risk-neutral firms can extract unbounded profits from consumers with prospect theory preferences

DOI10.1016/j.jet.2012.01.002zbMath1258.91125MaRDI QIDQ417637

Daniel Gottlieb, Eduardo M. Azevedo

Publication date: 14 May 2012

Published in: Journal of Economic Theory (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1016/j.jet.2012.01.002

zbMATH Keywords

prospect theory; equilibrium existence; dutch books; insurance markets

Mathematics Subject Classification ID

91B08: Individual preferences

91B42: Consumer behavior, demand theory

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Cites Work

• Advances in prospect theory: cumulative representation of uncertainty
• Violations of the betweenness axiom and nonlinearity in probability
• Preferences with frames: A new utility specification that allows for the framing of risks
• Cumulative prospect theory and the St. Petersburg paradox
• Risk, Ambiguity, and the Savage Axioms
• Parameter-Free Elicitation of Utility and Probability Weighting Functions
• Nonlinear Decision Weights in Choice Under Uncertainty
• A Model of Reference-Dependent Preferences*
• Prospect Theory: An Analysis of Decision under Risk
• Curvature of the Probability Weighting Function
• The Probability Weighting Function
• Le Comportement de l'Homme Rationnel devant le Risque: Critique des Postulats et Axiomes de l'Ecole Americaine