Transforming Ordinal Riskless Utility into Cardinal Risky Utility: A Comment on Chung, Glimcher, & Tymula (2019)
Peter P. Wakker
- American Economic Journal: Microeconomics (Forthcoming)
Chung, Glimcher, & Tymula (2019, this journal) observed both consumers’ choices over commodity bundles and choices under risk. They assumed a cardinal riskless utility function V representing consumer choices, and a cardinal risky utility function U. The two were inconsistent. This note shows that the two functions can be reconciled if we assume that V is ordinal. Then one utility function U can accommodate both risky and riskless choices.
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