Disappointment AversionBehavioral Decision MakingChoice TheoryAxiomatic ModelRevealed PreferencePsychologyChoice ModelExperimental Decision MakingBiasManagementExperimental EconomicsRisk AversionDecision TheoryPreference ModelingExpectation FormationEconomicsBehavioral SciencesMarketingFinanceBehavioral EconomicsUtility TheoryBusinessPreference ElicitationDecision ScienceEmotionMicroeconomics
The authors develop an axiomatic model of preferences over lotteries. The model is constructed axiomatically to capture decision behavior. It reproduces the Allais paradox, nests expected utility as a special case, is only one parameter richer, links positive beta to disappointment aversion, shows risk aversion implies disappointment aversion, and generalizes Arrow‑Pratt measures. © 1991 The Econometric Society.
An axiomatic model of preferences over lotteries is developed. It is shown that this model is consistent with the Allais paradox, includes expected utility theory as a special case, and is only one parameter ( beta) richer than the expected utility model. Allais paradox type behavior is identified with positive values of beta. Preferences with positive beta are said to be disappointment averse. It is shown that risk aversion implies disappointment aversion and that the Arrow-Pratt measures of risk aversion can be generalized in a straight-forward manner to the current framework. Copyright 1991 by The Econometric Society.
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Barbara J. Bulmahn, D. G. Rees · Technometrics · 1989 · 609 citations
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