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<p>In choice under risk, some prominent decision theories (such as prospect theory) rationalize violations of expected utility via non-linear probability weighting. This paper proposes a parsimonious one-parameter probability weighting function that can be inverse S-shaped (concave for small probabilities and convex for medium and large probabilities), linear (as in expected utility), or S-shaped (convex for small and medium probabilities and concave for large probabilities). Unlike other existing one-parameter probability weighting functions, our alternative is strictly increasing for all parameter values, and it is not restricted to crossing the 45° line at the same point.</p>

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A parsimonious probability weighting function

  • 期刊论文

  • 发表日期：

    2026年7月29日

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  • Pavlo Blavatskyy

摘要

In choice under risk, some prominent decision theories (such as prospect theory) rationalize violations of expected utility via non-linear probability weighting. This paper proposes a parsimonious one-parameter probability weighting function that can be inverse S-shaped (concave for small probabilities and convex for medium and large probabilities), linear (as in expected utility), or S-shaped (convex for small and medium probabilities and concave for large probabilities). Unlike other existing one-parameter probability weighting functions, our alternative is strictly increasing for all parameter values, and it is not restricted to crossing the 45° line at the same point.