Skip to main content

Parametric preference functionals under risk in the gain domain: A Bayesian analysis

Balcombe, Kelvin, Fraser, Iain M (2015) Parametric preference functionals under risk in the gain domain: A Bayesian analysis. Journal of Risk and Uncertainty, 50 (2). pp. 161-187. ISSN 0895-5646. E-ISSN 1573-0476. (doi:10.1007/s11166-015-9213-8) (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided)

The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided. (Contact us about this Publication)
Official URL
http://dx.doi.org/10.1007/s11166-015-9213-8

Abstract

The performance of rank dependent preference functionals under risk is comprehensively evaluated using Bayesian model averaging. Model comparisons are

made at three levels of heterogeneity plus three ways of linking deterministic and stochastic models: differences in utilities, differences in certainty equivalents and

contextual utility. Overall, the “best model”, which is conditional on the form of heterogeneity, is a form of Rank Dependent Utility or Prospect Theory that captures

most behaviour at the representative agent and individual level. However, the curvature of the probability weighting function for many individuals is S-shaped, or

ostensibly concave or convex rather than the inverse S-shape commonly employed. Also contextual utility is broadly supported across all levels of heterogeneity. Finally,

the Priority Heuristic model is estimated within a stochastic framework, and allowing for endogenous thresholds does improve model performance although it does not

compete well with the other specifications considered.

Item Type: Article
DOI/Identification number: 10.1007/s11166-015-9213-8
Uncontrolled keywords: Risk · Prospect theory · Rank dependent utility · Bayesian model averaging · Contextual utility
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculties > Social Sciences > School of Economics
Depositing User: Iain Fraser
Date Deposited: 04 Feb 2016 09:58 UTC
Last Modified: 01 Aug 2019 10:40 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/54001 (The current URI for this page, for reference purposes)
Fraser, Iain M: https://orcid.org/0000-0002-4689-6020
  • Depositors only (login required):