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New paradoxes of risky decision making
 Psychological Review
"... During the last 25 years, prospect theory and its successor, cumulative prospect theory, replaced expected utility as the dominant descriptive theories of risky decision making. Although these models account for the original Allais paradoxes, 11 new paradoxes show where prospect theories lead to sel ..."
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During the last 25 years, prospect theory and its successor, cumulative prospect theory, replaced expected utility as the dominant descriptive theories of risky decision making. Although these models account for the original Allais paradoxes, 11 new paradoxes show where prospect theories lead to selfcontradiction or systematic false predictions. The new findings are consistent with and, in several cases, were predicted in advance by simple “configural weight ” models in which probabilityconsequence branches are weighted by a function that depends on branch probability and ranks of consequences on discrete branches. Although they have some similarities to later models called “rankdependent utility, ” configural weight models do not satisfy coalescing, the assumption that branches leading to the same consequence can be combined by adding their probabilities. Nor do they satisfy cancellation, the “independence ” assumption that branches common to both alternatives can be removed. The transfer of attention exchange model, with parameters estimated from previous data, correctly predicts results with all 11 new paradoxes. Apparently, people do not frame choices as prospects but, instead, as trees with branches.
Gainloss separability and coalescing in risky decision making
 Management Science
, 2007
"... doi 10.1287/mnsc.1060.0592 ..."
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On the descriptive value of loss aversion in decisions under risk. Available at SSRN: http://ssrn.com/abstract=1012022 Ert
 Psychological Review
, 2010
"... Previous studies of loss aversion in decisions under risk have led to mixed results. Losses appear to loom larger than gains in some settings, but not in others. The current paper clarifies these results by highlighting six experimental manipulations that tend to increase the likelihood of the behav ..."
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Previous studies of loss aversion in decisions under risk have led to mixed results. Losses appear to loom larger than gains in some settings, but not in others. The current paper clarifies these results by highlighting six experimental manipulations that tend to increase the likelihood of the behavior predicted by loss aversion. These manipulations include: (1) framing of the safe alternative as the status quo; (2) ensuring that the choice pattern predicted by loss aversion maximizes the probability of positive (rather than zero or negative) outcomes; (3) the use of high nominal (numerical) payoffs; (4) the use of high stakes; (5) the inclusion of highly attractive risky prospects that creates a contrast effect; and (6) the use of long experiments in which no feedback is provided and in which the computation of the expected values is difficult. In addition, the results suggest the possibility of learning in the absence of feedback: The tendency to select simple strategies, like “maximize the worst outcome ” which implies “loss aversion”, increases when this behavior is not costly. Theoretical and practical implications are discussed.
Goals as Reference Points in Marathon Running: A Novel Test of ReferenceDependence.” Available at SSRN: http://ssrn.com/ abstract=2523510
, 2015
"... Abstract Although many empirical investigations have documented referencedependent preferences, most studies of reference dependence have considered only status quo reference points. In a largescale field study of marathon runners, we test whether goals, a nonstatus quo reference point, act simi ..."
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Abstract Although many empirical investigations have documented referencedependent preferences, most studies of reference dependence have considered only status quo reference points. In a largescale field study of marathon runners, we test whether goals, a nonstatus quo reference point, act similarly to status quo reference points. We find that satisfaction as a function of relative performance (the difference between a runner's time goal and her finishing time) exhibits loss aversion and diminishing sensitivity, consistent with the Prospect Theory value function. Unlike the Prospect Theory value function, however, we also find a discontinuity (or jump) at the reference point. We further find that loss aversion is moderated by goal importance, that multiple reference points simultaneously impact runner satisfaction, and that loss aversion is overestimated in predictions of satisfaction, but still present in actual experienced satisfaction.
Competence Effects for Choices involving Gains and Losses
, 2005
"... This paper investigates how choices are affected by the level of knowledge one has about the decision being made. We analyze the effect of knowledge on decisions involving gains and decisions involving losses. For decisions involving gains, we replicate Kilka and Weber’s results (2002), finding that ..."
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This paper investigates how choices are affected by the level of knowledge one has about the decision being made. We analyze the effect of knowledge on decisions involving gains and decisions involving losses. For decisions involving gains, we replicate Kilka and Weber’s results (2002), finding that decision makers are more attracted to choices that they feel more knowledgeable about. However, for decisions involving losses, we find no differences in the attractiveness of choices with different levels of knowledge. We conclude that Heath and Tverky’s competence hypothesis (1991) does not hold in the losses domain of our sample.
Discrete bipolar universal integrals
"... Abstract. The concept of universal integral, recently proposed, generalizes the Choquet, Shilkret and Sugeno integrals. Those integrals admit a discrete bipolar formulation, useful in those situations where the underlying scale is bipolar. In this paper we propose the concept of discrete bipolar un ..."
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Abstract. The concept of universal integral, recently proposed, generalizes the Choquet, Shilkret and Sugeno integrals. Those integrals admit a discrete bipolar formulation, useful in those situations where the underlying scale is bipolar. In this paper we propose the concept of discrete bipolar universal integral, in order to provide a common framework for bipolar discrete integrals, including as special cases the discrete Choquet, Shilkret and Sugeno bipolar integrals. Moreover we provide two different axiomatic characterizations of the proposed discrete bipolar universal integral.
ScienceDirect Discrete bipolar universal integrals
"... Abstract The concept of universal integral, recently proposed, generalizes the Choquet, Shilkret and Sugeno integrals. Those integrals admit a discrete bipolar formulation, useful in those situations where the underlying scale is bipolar. In this paper we propose the concept of discrete bipolar uni ..."
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Abstract The concept of universal integral, recently proposed, generalizes the Choquet, Shilkret and Sugeno integrals. Those integrals admit a discrete bipolar formulation, useful in those situations where the underlying scale is bipolar. In this paper we propose the concept of discrete bipolar universal integral, in order to provide a common framework for bipolar discrete integrals, including as special cases the discrete Choquet, Shilkret and Sugeno bipolar integrals. Moreover we provide two different axiomatic characterizations of the proposed discrete bipolar universal integral.
Short Title: New Tests of Risky Decision Making Contact Info: Mailing address:
"... This paper tests new “independence ” properties to compare three models of risky decision making. According to the Rank Affected Multiplicative weights (RAM) model, all three properties should be satisfied; according to the Transfer of Attention exchange model (TAX), two should be satisfied and one ..."
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This paper tests new “independence ” properties to compare three models of risky decision making. According to the Rank Affected Multiplicative weights (RAM) model, all three properties should be satisfied; according to the Transfer of Attention exchange model (TAX), two should be satisfied and one can be violated. However, according to Cumulative Prospect Theory (CPT), all three properties will be violated if the probability weighting function is nonlinear. Although CPT is flexible enough to accommodate violations of these properties, its predicted violations based on previously estimated parameters failed to materialize. In fourteen choices where the CPT model disagreed with TAX, CPT correctly predicted the modal choice in only one case and TAX predicted the modal choice in the other thirteen. New versions of three other paradoxes were also tested and found to refute CPT.
Filename: Gain_loss_paper_03_10_05.doc Contact Info: Mailing address:
"... This experiment tested behavioral properties of risky decision making to test between descriptive models: GainLoss Separability and Coalescing. Cumulative prospect theory (CPT) satisfies both properties, but transfer of attention exchange model (TAX) violates both. New tests were devised to compare ..."
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This experiment tested behavioral properties of risky decision making to test between descriptive models: GainLoss Separability and Coalescing. Cumulative prospect theory (CPT) satisfies both properties, but transfer of attention exchange model (TAX) violates both. New tests were devised to compare predictions of CPT and TAX as fit to previous data to predict the new results. Contrary to CPT, there were systematic violations of coalescing and of gainloss separability, consistent with predictions of the TAX model. In addition, tests of gainloss separability depended systematically on how branches were split or coalesced. The TAX model, as fit to previous data, predicted the new data fairly well, correctly predicting when gainloss separability would be violated and when it would be satisfied. Risky Decision Making 3 GainLoss Separability and Coalescing in Risky Decision Making