Local Utility Functions and Local Probability Transformations |
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| Authors: | John Quiggin Robert G. Chambers |
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| Affiliation: | (1) University of Queensland, Australia;(2) University of Maryland, Australia;(3) University of Western Australia, Australia |
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| Abstract: | This note shows that, under appropriate conditions, preferences may be locally approximated by the linear utility or risk-neutral preference functional associated with a local probability transformation. |
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| Keywords: | local utility function probability weight: rank-dependent utility |
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