On a derivation of the Goldstein-Einhorn probability weighting functions

DOI10.1007/S00010-020-00704-7MaRDI QIDQ785652zbMATH OpenOpenAlexWikidataFDO

Authors Jacek Chudziak

Publication date 7 August 2020

Published in Aequationes Mathematicae (Search for Journal in Brave)

Copyright license Creative Commons Attribution 4.0 International

Full work available at URL https://doi.org/10.1007/s00010-020-00704-7

zbMATH Keywords

Goldstein-Einhorn functionsindifference pricingpositive homogeneityprobability weighting functionutility representation

Mathematics Subject Classification ID

Functional equations for real functions (39B22) Utility theory (91B16)

Review text

The author derives a necessary and sufficient condition for the indifference bid price on the family of all binary lotteries to coincide with the expected value for binary gambles. The condition is that the probability weighting function must be of Goldstein-Einhorn type (see [\textit{W. M. Goldstein} and \textit{H. J. Einhorn}, Expression theory and the preference reversal phenomenon, Psychol. Rev. 94, 236--254 (1987)]).

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Cites work

• A behavioral condition for Prelec's weighting function on the positive line without assuming W(1)=1
• A simple derivation of Prelec's probability weighting function
• Advances in prospect theory: cumulative representation of uncertainty
• An introduction to the theory of functional equations and inequalities. Cauchy's equation and Jensen's inequality. Edited by Attila Gilányi
• Curvature of the Probability Weighting Function
• scientific article; zbMATH DE number 3288322 (Why is no real title available?)
• Pexider's equation and aggregation of allocations
• Reduction invariance and Prelec's weighting functions
• Risk Aversion in the Small and in the Large
• Stochastic finance. An introduction in discrete time
• The Probability Weighting Function
• Using logarithmic derivative functions for assessing the risky weighting function for binary gambles

Cited in

(3)

• An axiomatization of the Goldstein-Einhorn weighting functions
• scientific article; zbMATH DE number 6001262 (Why is no real title available?)
• A note on the shape of the probability weighting function

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