(1) Centre de recherche sur les transports, Université de Montréal, C.P. 6128, Succ. Centre-Ville, Montreal, Qc, H3C 3J7;(2) HEC-Montreal, 3000, Chemin de la Côte-Sainte-Catherine, Montreals, Qc, H3T 2A7
Abstract:
This article analyzes the implications of basic lottery tests for the probability weighting function w(p). We first show that the w(p) function with one argument cannot accommodate three basic tests of lottery choice. We also discuss in detail the links between the w(p) function with one argument and the preference reversal paradox. In the last section we propose an evaluation function that accommodates the restrictions imposed by the tests and we provide an example of such function.