Abstract:This chapter introduces a version of Cumulative Prospect Theory in a quantile utility model with multiple priors on possible events as proposed in [8]. The chapter analyzes the decision-maker’s risk and ambiguity perception facing ordinary and exterme events. It is showed a new functional that models asymmetric attitude with respect to ambiguity on extreme events (optimism respects windfall gains and pessimism respects catastrophic events) and the decision-maker’s attitude to consider maximization of entropy a… Show more
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