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1.
Prospect theory for continuous distributions 总被引:2,自引:0,他引:2
We extend the original form of prospect theory by Kahneman and Tversky from finite lotteries to arbitrary probability distributions,
using an approximation method based on weak-⋆ convergence. The resulting formula is computationally easier than the corresponding
formula for cumulative prospect theory and makes it possible to use prospect theory in future applications in economics and
finance. Moreover, we suggest a method how to incorporate a crucial step of the “editing phase” into prospect theory and to
remove in this way the discontinuity of the original model.
相似文献
Mei Wang (Corresponding author)Email: |
2.
Mohammed Abdellaoui Han Bleichrodt Olivier L’Haridon 《Journal of Risk and Uncertainty》2008,36(3):245-266
This paper provides an efficient method to measure utility under prospect theory. Our method minimizes both the number of
elicitations required to measure utility and the cognitive burden for subjects, being based on the elicitation of certainty
equivalents for two-outcome prospects. We applied our method in an experiment and were able to replicate the main findings
on prospect theory, suggesting that our method measures what it is intended to. Our data confirmed empirically that risk seeking
and concave utility can coincide under prospect theory. Utility did not depend on the probability used in the elicitation,
which offers support for the validity of prospect theory.
相似文献
Olivier L’HaridonEmail: |
3.
Pavlo R. Blavatskyy 《Journal of Risk and Uncertainty》2007,34(3):259-286
This paper proposes a new decision theory of how individuals make random errors when they compute the expected utility of
risky lotteries. When distorted by errors, the expected utility of a lottery never exceeds (falls below) the utility of the
highest (lowest) outcome. This assumption implies that errors are likely to overvalue (undervalue) lotteries with expected
utility close to the utility of the lowest (highest) outcome. Proposed theory explains many stylized empirical facts such
as the fourfold pattern of risk attitudes, common consequence effect (Allais paradox), common ratio effect and violations
of betweenness. Theory fits the data from ten well-known experimental studies at least as well as cumulative prospect theory.
相似文献
Pavlo R. BlavatskyyEmail: |
4.
5.
W. Kip Viscusi 《Journal of Risk and Uncertainty》2009,38(3):191-213
This paper uses a random utility model to examine stated preferences for the valuation of public risks of fatalities from
terrorist attacks and natural disasters. Traffic-related deaths serve as the common reference point in two series of pairwise
risk-risk tradeoff choices. Even after taking into account differences in respondent risk beliefs, the nationally representative
sample values the prevention of terrorism deaths almost twice as highly as preventing natural disaster deaths and at about
the same level as preventing deaths from traffic accidents, which pose greater personal risk. Education, seatbelt usage, political
preferences, and terrorism risk beliefs affect valuations in the expected manner.
相似文献
W. Kip ViscusiEmail: |
6.
7.
Eliciting decision weights by adapting de Finetti’s betting-odds method to prospect theory 总被引:1,自引:0,他引:1
Enrico Diecidue Peter P. Wakker Marcel Zeelenberg 《Journal of Risk and Uncertainty》2007,34(3):179-199
This paper extends de Finetti’s betting-odds method for assessing subjective beliefs to ambiguous events. Thus, a tractable
manner for measuring decision weights under ambiguity is obtained. De Finetti’s method is so transparent that decision makers
can evaluate the relevant tradeoffs in complex situations. The resulting data can easily be analyzed, using nonparametric
techniques. Our extension is implemented in an experiment on predicting next-day’s performance of the Dow Jones and Nikkei
stock indexes, where we test the existence and nature of rank dependence, finding usual patterns. We also find violations
of rank dependence.
相似文献
Peter P. WakkerEmail: URL: http://www.few.eur.nl/few/people/wakker/ |
8.
Many decisions require tradeoffs over time and in the presence of risk. To examine interactions between risk and intertemporal
effects we developed a laboratory experiment. In the experiment, subjects choose between payoffs that take place at different
points in time. We find that very few subjects are consistently risk averse or risk loving. Instead, we find that subjects
are less patient in the presence of risk. We also find that increased risk decreases subjects’ patience levels. However, we
do not find evidence that the effect of risk on the intertemporal decision depends on the length of the temporal delay.
相似文献
Lisa R. AndersonEmail: |
9.
We analyze the risk levels chosen by agents who have private information regarding their quality, and whose performance will
be judged and rewarded by outsiders. Assume that risk choice is observable. Agents will choose risk strategically to enhance
their expected reputations. We show that conspicuous conservatism results: agents of different qualities choose levels below
those that would be chosen if quality were observable. This happens because bad agents must cloak their identity by choosing
the same risk level as good agents, and good agents are more likely to distinguish themselves if they reduce the risk level.
Our results contrast starkly with those for the case when risk choice cannot be observed.
相似文献
Richard ZeckhauserEmail: |
10.
11.
Jinkwon Lee 《Journal of Risk and Uncertainty》2008,36(1):19-41
We experimentally investigate the effect of an independent and exogenous background risk to initial wealth on subjects’ risk
attitudes and explore an appropriate incentive mechanism when identical or similar tasks are repeated in an experiment. Taking
a simple chance improving decision model under risk where the winning probabilities are negatively related to the potential
gain, we find that such a background risk tends to make risk-averse subjects behave more risk aversely. Furthermore, we find
that risk-averse subjects tend to show decreasing absolute risk aversion (DARA), and that a random round payoff mechanism
(RRPM) would control the possible wealth effect. This suggests that RRPM would be a better incentive mechanism for an experiment
where repetition of a task is used.
相似文献
Jinkwon LeeEmail: |
12.
Dynamically inconsistent decision makers have to decide, implicitly or explicitly, what to do about their dynamic inconsistency.
Economic theorists have identified three possible responses—to act naively (thus ignoring the dynamic inconsistency), to act
resolutely (not letting their inconsistency affect their behaviour) or to act sophisticatedly (hence taking into account their
inconsistency). We use data from a unique experiment (which observes both decisions and evaluations) in order to distinguish
these three possibilities. We find that the majority of subjects are either naive or resolute (with slightly more being naive)
but very few are sophisticated. These results have important implications for predicting the behaviour of people in dynamic
situations.
相似文献
John D. HeyEmail: |
13.
Individual and group decision making under risk: An experimental study of Bayesian updating and violations of first-order stochastic dominance 总被引:2,自引:0,他引:2
This paper reports the results of experiments designed to test whether individuals and groups abide by monotonicity with respect
to first-order stochastic dominance and Bayesian updating when making decisions under risk. The results indicate a significant
number of violations of both principles. The violation rate when groups make decisions is substantially lower, and decreasing
with group size, suggesting that social interaction improves the decision-making process. Greater transparency of the decision
task reduces the violation rate, suggesting that these violations are due to judgment errors rather than the preference structure.
In one treatment, however, less complex decisions result in a higher error rates.
相似文献
Edi KarniEmail: |
14.
In two experiments conducted with low-income participants, we find that individuals are more likely to buy state lottery tickets
when they make several purchase decisions one-at-a-time, i.e. myopically, than when they make one decision about how many
tickets to purchase. These results extend earlier findings showing that “broad bracketing” of decisions encourages behavior
consistent with expected value maximization. Additionally, the results suggest that the combination of myopic decision making
and the “peanuts effect”—greater risk seeking for low stakes than high stakes gambles—can help explain the popularity of state
lotteries.
相似文献
George LoewensteinEmail: |
15.
Christian Gollier 《Journal of Risk and Uncertainty》2007,35(2):107-127
We examine the collective risk attitude of a group with heterogeneous beliefs. We prove that the wealth-dependent probability
distribution used by the representative agent is biased in favor of the beliefs of the more risk tolerant consumers. Moreover,
increasing disagreement on the state probability raises the state probability of the representative agent. It implies that
when most disagreements are concentrated in the tails of the distribution, the perceived collective risk is magnified. This
can help to solve the equity premium puzzle. We show that the trade volume and the equity premium are positively correlated.
相似文献
Christian GollierEmail: |
16.
We present two theorems that yield necessary and sufficient conditions for first- and second-degree stochastic dominance deteriorations
of background risk to increase risk aversion with respect to foreground risk. We require that any change in a foreground risk
that is undesirable remains so after a background risk changes in a way that is either unfair, undesirable in the sense of
reducing expected utility, or undesirable in the sense of increasing expected marginal utility. Our results thus characterize
utility functions that are, respectively, vulnerable, proper, or standard with respect to changes in background risk.
相似文献
Arthur SnowEmail: |
17.
People violate expected utility theory and this has been traditionally modeled by augmenting its weight-and-add framework
by nonlinear transformations of values and probabilities. Yet individuals often use one-reason decision-making when making
court decisions or choosing cellular phones, and institutions do the same when creating rules for traffic safety or fair play
in sports. We analyze a model of one-reason decision-making, the priority heuristic, and show that it simultaneously implies
common consequence effects, common ratio effects, reflection effects, and the fourfold pattern of risk attitude. The preferences
represented by the priority heuristic satisfy some standard axioms. This work may provide the basis for a new look at bounded
rationality.
相似文献
Konstantinos V. KatsikopoulosEmail: |
18.
Scope insensitivity and embedding are fundamental concerns in contingent valuation studies for health risk reductions. Recently,
choice experiments have increasingly been used to obtain contingent willingness to pay (WTP) estimates. We juxtapose the WTP
estimates of a choice experiment (CE) to those of the contingent valuation method (CVM) for different health risk reductions
and compare them in the extent of scope insensitivity and embedding. WTP using CVM is scope sensitive for single health risks,
but embedding is observed for multiple disease risks. In contrast, WTP based on the CE is highly scope sensitive and convex
in risk reduction levels.
相似文献
Jutta RoosenEmail: |
19.
We develop and test a model which links information acquisition decisions to the hedonic utility of information. Acquiring
and attending to information increases the psychological impact of information (an impact effect), increases the speed of adjustment for a utility reference-point (a reference-point updating effect), and affects the degree of risk aversion towards randomness in news (a risk aversion effect). Given plausible parameter values, the model predicts asymmetric preferences for the timing of resolution of uncertainty:
Individuals should monitor and attend to information more actively given preliminary good news but “put their heads in the
sand” by avoiding additional information given adverse prior news. We test for such an “ostrich effect” in a finance context,
examining the account monitoring behavior of Scandinavian and American investors in two datasets. In both datasets, investors
monitor their portfolios more frequently in rising markets than when markets are flat or falling.
相似文献
Duane SeppiEmail: |
20.
We study optimal investment in self-protection of insured individuals when they face interdependencies in the form of potential
contamination from others. If individuals cannot coordinate their actions, then the positive externality of investing in self-protection
implies that, in equilibrium, individuals underinvest in self-protection. Limiting insurance coverage through deductibles
or selling “at-fault” insurance can partially internalize this externality and thereby improve individual and social welfare.
相似文献
Howard KunreutherEmail: |