Incremental evaluation of risky choices.

ABSTRACT

This paper compares the incremental method of valuation and its possible effects on choices analysed through utility theory with similar zero-base valuations. Analysis shows how biases can arise using incremental valuations in situations with decreasing risk aversion. This could be important in certain circumstances, e.g. delegated decision-making in cases where the total value of an organisation is unknown to the decision-maker or difficult to quantify.