Choice-based assessment of utility functions

Abstract An approach for calibrating utility functions in which consistent paired-comparison response modes are used for both elicitation and descriptive validation is proposed and experimentally evaluated. The choice-based procedure presented has the potential to avoid the systematic biases often observed in functions assessed via indifference judgments such as probability or certainty equivalents. Our results indicate that the choice-based assessment procedure outperforms calibration approaches based on indifference judgments in predicting subjects' choices among risky options for the two types of utility models studied, von Neumann-Morgenstern expected utility and lottery dependent expected utility.

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