English

A duality between utility transforms and probability distortions

Theoretical Economics 2024-03-21 v2

Abstract

In this paper, we establish a mathematical duality between utility transforms and probability distortions. These transforms play a central role in decision under risk by forming the foundation for the classic theories of expected utility, dual utility, and rank-dependent utility. Our main results establish that probability distortions are characterized by commutation with utility transforms, and utility transforms are characterized by commutation with probability distortions. These results require no additional conditions, and hence each class can be axiomatized with only one property. Moreover, under monotonicity, rank-dependent utility transforms can be characterized by set commutation with either utility transforms or probability distortions.

Keywords

Cite

@article{arxiv.2309.05816,
  title  = {A duality between utility transforms and probability distortions},
  author = {Christopher P. Chambers and Peng Liu and Ruodu Wang},
  journal= {arXiv preprint arXiv:2309.05816},
  year   = {2024}
}

Comments

24 pages

R2 v1 2026-06-28T12:18:38.042Z