Harin, Alexander (2014): Problems of utility and prospect theories. A ”certainuncertain” inconsistency of the randomlottery incentive system.

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Abstract
Three main groups of results have been obtained:
1) The question is emphasized whether the probability weighting function W(p) is continuous. If W(p) reveals a discontinuity at p=1, then this is a topological feature. This can qualitatively change (at least) the mathematical aspects of the utility and prospect theories. This is supported by a number of the evidences of the qualitative difference between subjects’ treatments of the probabilities of probable and certain outcomes.
2) Purely mathematical theorems prove (under several conditions) that if the dispersion of data (the noise) is nonzero, then the nonzero discontinuity take place at the probability p=1.
3) In the prevailing randomlottery incentive system of the experiments of the utility and prospect theories, the choices of certain outcomes are stimulated by uncertain lotteries. Because of this evident “certainuncertain” inconsistency, the deductions from the randomlottery incentive experiments, those include the certain outcomes, cannot be unquestionably correct. The experiment of Starmer and Sugden (1991) evidently supports this consideration.
Item Type:  MPRA Paper 

Original Title:  Problems of utility and prospect theories. A ”certainuncertain” inconsistency of the randomlottery incentive system 
Language:  English 
Keywords:  utility; prospect theory; experiment; incentive; randomlottery incentive system; Prelec; probability weighting function; 
Subjects:  C  Mathematical and Quantitative Methods > C1  Econometric and Statistical Methods and Methodology: General C  Mathematical and Quantitative Methods > C9  Design of Experiments C  Mathematical and Quantitative Methods > C9  Design of Experiments > C91  Laboratory, Individual Behavior D  Microeconomics > D8  Information, Knowledge, and Uncertainty D  Microeconomics > D8  Information, Knowledge, and Uncertainty > D81  Criteria for DecisionMaking under Risk and Uncertainty 
Item ID:  55706 
Depositing User:  Alexander Harin 
Date Deposited:  03 May 2014 17:28 
Last Modified:  28 Sep 2019 18:08 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/55706 