Warsaw Economic Seminars
WES
Hour: 17.10
Date: April, 16th (Thursday) 2015
Place: Room 2302, PKiN, INE PAN
The range-dependent utility model as a
general framework for decisions under
risk and ambiguity
Michał Lewandowski
Warsaw School of Economics
Abstract:
The range-dependent utility model for risk is a modification of Expected Utility Theory in which
the utility function depends on the range of lottery outcomes. The decision utility model is a simple
special case of the range-dependent utility model in which monetary Certainty Equivalents are scaleand shift invariant. We propose to extend these models in several ways: in the decision utility model
we let Certainty Equivalents be scale- but not shift- invariant to allow for wealth effects which are
present especially when lottery outcome ranges spread over large intervals. We also extend the rangedependent utility model for decisions under ambiguity with the Arrow-Hurwicz criterion being the
special case for the extreme complete ignorance case.
Joint work with: Krzysztof Kontek (SGH).
Warsaw Economic Seminars
organized by
Warsaw School of Economics & Faculty of Economics, University of Warsaw & Institute of Economics
of the Polish Academy of Sciences
www: https://sites.google.com/site/warsaweconseminars/
e-mail: [email protected].