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  3. American Economic Journal: Microeconomics
  4. May 2022
  5. Transforming Ordinal Riskless Utility into Cardinal Risky Utility: A Comment on Chung, Glimcher, and Tymula (2019)

Transforming Ordinal Riskless Utility into Cardinal Risky Utility: A Comment on Chung, Glimcher, and Tymula (2019)

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Abstract

Chung, Glimcher, and Tymula (2019) observed both consumers' choices over commodity bundles and choices under risk. They assumed a cardinal riskless utility function V representing consumer choices and a cardinal risky utility function U. The two were inconsistent. This note shows that the two functions can be reconciled if we assume that V is ordinal. Then one utility function U can accommodate both risky and riskless choices.

Citation

Wakker, Peter P. 2022. "Transforming Ordinal Riskless Utility into Cardinal Risky Utility: A Comment on Chung, Glimcher, and Tymula (2019)." American Economic Journal: Microeconomics, 14 (2): 561-65. DOI: 10.1257/mic.20190338

Additional Materials

JEL Classification

  • C91 Design of Experiments: Laboratory, Individual
  • D12 Consumer Economics: Empirical Analysis
  • D81 Criteria for Decision-Making under Risk and Uncertainty
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