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RPS(1) Preferences

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Document pages: 15 pages

Abstract: We consider a model for decision making based on an adaptive, k-period,learning process where the priors are selected according to VonNeumann-Morgenstern expected utility principle. A preference relation betweentwo prospects is introduced, defined by the condition which prospect isselected more often. We show that the new preferences have similarities withthe preferences obtained by Kahneman and Tversky (1979) in the context of theprospect theory. Additionally, we establish that in the limit of large learningperiod, the new preferences coincide with the expected utility principle.

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