Endogenizing Prospect Theory’s Reference Point. by Ulrich Schmidt and Horst Zank. Professor : Soe-Tsyr , Yuan Presenter : Sherry. Outline. Abstract Introduction Prospect Theory Function Endogenous Prospect Theory What is “Preference” Main condition in paper Conclusion .
Endogenizing Prospect Theory’s
by Ulrich Schmidt and Horst Zank
Professor : Soe-Tsyr, Yuan
Presenter : Sherry
whenever A > B and B > C, then also A > C
whenever A ≥ B and B ≥ C, then also A ≥ C
whenever A = B and B = C, then also A = C.
… represent all of possible results;
represent the probability of all of the results;
is value function, and it means the relatively value in the decision-maker’s mind;
is probability weighting function, and it means the reaction of most people face probability.
Such a finding is in agreement with risk aversion in the sense of diminishing marginal utility for increments in outcomes.
This latter finding is in agreement with risk seeking in the sense of diminishing marginal utility for decrements in outcomes.
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