Download This PaperA Note on the Utility Function Under Prospect Theory
7 Pages Posted: 12 May 2008 Last revised: 7 Jul 2008
Date Written: July 12, 2007
Abstract
We show that preference-homogeneity and loss-aversion are necessary and sufficient for the value function to have the power form with identical powers for gains and losses and for the probability weighting functions for gains and losses to be identical.
Keywords: Prospect Theory, Preference homogeneity, Functional equations
JEL Classification: C60, D81
Suggested Citation: Suggested Citation
Ali Al-Nowaihi
University of Leicester - Department of Economics ( email )
Department of Economics
Leicester LE1 7RH, Leicestershire LE1 7RH
United Kingdom
Sanjit Dhami (Contact Author)
University of Leicester ( email )
Department of Economics
Leicester LE1 7RH, Leicestershire LE1 7RH
United Kingdom
HOME PAGE: http://www2.le.ac.uk/departments/economics/people/sdhami
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