The Effect of Probabilities On the Subjective Evaluation of Lotteries
The Effect of Probabilities On the Subjective Evaluation of Lotteries
Uday S Karmarkar
The book The Effect of Probabilities On the Subjective Evaluation of Lotteries was written by author Uday S Karmarkar Here you can read free online of The Effect of Probabilities On the Subjective Evaluation of Lotteries book, rate and share your impressions in comments. If you don't know what to write, just answer the question: Why is The Effect of Probabilities On the Subjective Evaluation of Lotteries a good or bad book?
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The range of payoffs is chosen so as to involve sums of money that the subject is familiar with in the sense that he can make realistic decisions about them. Ii) Assign arbitrary values to the utilities of the endpoints of the range of payoffs chosen. Let U(100) = 10 and U(0) = (say) so that the utility curve is "pinned down" at these two points. This can always be done since choice between lotteries is unaffected by a positive linear transform of the utility function. That is : If U(x) is a ut...ility function, then U'(x)= a + bU(x) is a strategically equivalent utility function leading to the same decision making behavior. Iii) Given payoffs x, and x 2 such that U(x, ) and U(x 2 ) are known (have been assigned), partition the range by constructing a lottery offering a chance p at x, and a chance (1-p) at x«. To start with, we would take x-, =100 and x 2 = 0. To ensure canonicity of the lottery offered, the subject could be supplied with a physical model of an experiment with equally likely outcomes or with some other model representing the chance p at prize x, .
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