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Positive Homogeneity of the Principle of Equivalent Utility

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Chudziak J., Chudziak M., Sobek B.
Acta Physica Polonica A
|
2016
|
vol. 129
|
issue 5
941-944
EN
We prove that if the principle of equivalent utility under the cumulative prospect theory is positively homogeneous on a relatively small family of risks for every non-negative initial wealth level, then a value function is linear for gains and losses, but, in general, it needs not be linear.
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