Abstract

Three reasons for why people may evaluate utility in a rank-dependent fashion have been suggested: (a) rank-dependent weighting is a function of perceptual biases and thus not prescriptively defensible; (b) weights are (re)distributed by motivational processes that reflect stable personality characteristics of the decision maker; and (c) weights are (re)distributed as a function of the situation, allowing rank-dependent evaluation to be a rational response to an environment with asymmetric loss functions. By modifying a study by Wakker, Erev, and Weber (1994) we show that all three processes — that is, perceptual biases, individual predispositions in weighting, as well as rational adaptation to an asymmetric loss function — can be involved in rank-dependent weighting.

Citation

Weber, Elke, and B. Kirsner. "Reasons for rank-dependent utility evaluation." Journal of Risk and Uncertainty 14, no. 1 (January 1997): 41-61.

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