This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

  1. Home
  2. Journals
  3. American Economic Review
  4. March 2009
  5. Risk, Ambiguity, and the Rank-Dependence Axioms

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Risk, Ambiguity, and the Rank-Dependence Axioms

  • Mark J. Machina
American Economic Review
vol. 99, no. 1, March 2009
(pp. 385–92)
Download Full Text PDF

Abstract

Choice problems in the spirit of Ellsberg (1961) suggest that rank-dependent ("Choquet expected utility") preferences over subjective gambles might be subject to the same difficulties that Ellsberg's earlier examples posed for subjective expected utility. These difficulties stem from event-separability properties that rank-dependent preferences partially retain from expected utility, and suggest that nonseparable models of preferences might be better at capturing features of behavior that lead to these paradoxes. (JEL D81)

Citation

Machina, Mark J. 2009. "Risk, Ambiguity, and the Rank-Dependence Axioms." American Economic Review, 99 (1): 385–92. DOI: 10.1257/aer.99.1.385

JEL Classification

  • D81 Criteria for Decision-Making under Risk and Uncertainty