Prospect theory: for risk and ambiguity
Introduction -- Expected utility. The general model of decision under uncertainty no-arbitrage (expected utility with known utilities and unknown probabilities) -- Expected utility with known probabilities--'risk'--and unknown utilities -- Applications of expected utility for risk -- Expected utility with unknown probabilities and unknown utilities -- Nonexpected utility for risk. Heuristic arguments for probabilistic sensitivity and rank dependence -- Probabilistic sensitivity and rank dependence analyzed -- Applications and extensions of rank dependence -- Where prospect theory deviates from rank-dependent utility and expected utility: reference dependence versus asset integration -- Prospect theory for decision under risk -- Nonexpected utility for uncertainty. Extending rank-dependent utility from risk to uncertainty -- Ambiguity: where uncertainty extends beyond risk -- Prospect theory for uncertainty -- Conclusion