Risk Aversion in Quiggin and Yaari's Rank-Order Model of Choice under Uncertainty.

This paper studies the rank-dependent model of choice under uncertainty proposed by J. Quiggin in 1982 and elaborated by M. E. Yaari in 1984. First, a rigorous axiomatic foundation for the model is provided. A very close analogy with expected utility theory is drawn permitting a considerably simplified treatment. Risk aversion and its measurement are then studied; two characterizations, one weaker and one stronger, are presented in addition to the one considered by Yaari. Lastly, risk aversion and other properties of th model are related to empirically observed departures from expected utility maximizing behavior. Copyright 1987 by Royal Economic Society.