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The Handbook of Rational and Social Choice$
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Paul Anand, Prasanta Pattanaik, and Clemens Puppe

Print publication date: 2009

Print ISBN-13: 9780199290420

Published to Oxford Scholarship Online: May 2009

DOI: 10.1093/acprof:oso/9780199290420.001.0001

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Applications of Non‐Expected Utility

Applications of Non‐Expected Utility

The Handbook of Rational and Social Choice

Han Bleichrodt

Ulrich Schmidt

Oxford University Press

Expected utility is the dominant framework for analyzing decisions under risk and uncertainty. Many empirical studies show that people deviate systematically from expected utility. To accommodate these deviations new, non‐expected utility models have been proposed. Among these models prospect theory is the most influential. This chapter studies applications of non‐expected utility and in particular prospect theory in insurance economics, auctions, and health economics. This chapter shows how the insights from non‐expected utility have improved understanding of people's choices and have led to improved decisions and more accurate measurements of utility.

Keywords:   non‐expected utility, prospect theory, insurance, auctions, health

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