Search results for "Prospect theory"
showing 10 items of 16 documents
Decision Under Uncertainty: An Experimental View
2010
This work (experimental research) is based on Prospect theory, which was developed by D. Kahneman and A. Tversky in 1979. This is one the most quoted and best-documented point of view in economic psychology. First of all, it replaces, once again, the notion of utility with value. But value is defined in terms of gains and losses and this, according with an irrational human tendency to be less willing to gamble with profits than with losses. So, we discover the great importance of these assumptions in the field of risk individual decision-making. n experimental study was conducted to examine the influence of elaboration and the way in which alternatives are phased on decision. Subjects were …
Decision Making in Evolving Artificial Systems
2001
The theme of this workshop is artificial perception. In this chapter we will argue that the ecological function of perception is to serve decision-making. If this is so the mechanisms chosen to implement perception, in natural or artificial systems, will be constrained by the requirements of decision-making and theories of decision-making will inevitably influence theories of perception. In what follows we will look at decision-making from what we hope is a new perspective, applying concepts and techniques developed by what we will call “new artificial intelligence”. We will begin, in the second part of the chapter, with a review of traditional, “normative” theories of decision-making and o…
Testing Prospect Theory in a Deterministic Multiple Criteria Decision-Making Environment
1993
Prospect theory by Kahneman and Tversky [7] is tested in a deterministic multiple criteria decision-making context. In two experiments conducted in classroom settings subjects made pairwise preference comparisons of condominiums for sale. The results of the experiments indicate that the traditional value model did not explain the subjects' revealed preferences as well as the prospect model. We conclude that prospect theory is a reasonable model of choice for many individuals in such a context.
The effect of the emotive decisions in prospect theory.
2015
AbstractThe main purpose of this paper was to show that the certainty and reflection effects of prospect theory do not occur when stimuli have an affective value. To this end, 160 participants were asked to reply to a series of problems originally designed by Kahneman and Tversky (1979), but modified according to the contributions of Rottenstreich and Hsee (2001). The sample was divided into four experimental conditions, two in a gain situation and two in a loss situation. In both cases, affect-rich and affect-poor stimuli were applied in sure and probable alternatives. The findings showed that, in agreement with our hypotheses, the affective value of the stimuli altered the outcome predict…
When buyers also sell: The implications of pricing policies for customer satisfaction
2002
In certain purchase situations, such as when a new car is purchased and an old vehicle is traded in, individuals simultaneously play the role of buyers and sellers. It is interesting to observe that, when evaluating the purchase and selling prices of the new and old products respectively, such consumers often fail to behave rationally. For example, a discount on the price of the new commodity and an equivalent markup on the old product will be weighted differently. This empirical phenomenon can be analyzed with the aid of the prospect theory - an approach based on the descriptive decision theory. This theory facilitates the elaboration of decision-making rules for determining the optimum pu…
The effects of message framing in CSR advertising on consumers’ emotions, attitudes, and behavioral intentions
2022
While recent research on sustainability communication demonstrates the relevance of message framing, research on the effects of message framing on consumers' emotions is scant. Using the Stimulus-Organism-Response (5-0-R) framework, this paper examines the impact of environmental advertisements (stimuli) on two discrete emotions - hope and guilt - (organism) and how these emotions influence consumers' behavioral intentions (responses). Relying on the prospect theory, this study focuses on positive (gain) and negative (loss) frames. Study 1 shows that, in the context of Corporate Social Responsibility (CSR), a gain message elicits hope while a loss-message triggers guilt. Study 2 shows that …
Prospect theory and stochastic multicriteria acceptability analysis (SMAA)
2009
Abstract We consider problems where multiple decision makers (DMs) want to choose their most preferred alternative from a finite set based on multiple criteria. Several approaches to support DMs in such problems have been suggested. Prospect theory has appealed to researchers through its descriptive power, but rare attempts have been made to apply it to support multicriteria decision making. The basic idea of prospect theory is that alternatives are evaluated by a difference function in terms of gains and losses with respect to a reference point. The function is suggested to be concave for gains and convex for losses and steeper for losses than for gains. Stochastic multicriteria acceptabil…
Solving the discrete multiple criteria problem using linear prospect theory
1994
Abstract Prospect theory developed by Kahneman and Tversky is a popular model of choice in decision problems under uncertainty. Prospect theory has recently been extended to multiple criteria choice problems. In this paper, an interactive method for solving discrete multiple criteria decision problems, based on prospect theory type value functions, has been developed. Piecewise linear marginal value functions are assumed to approximate the S-shaped value functions of prospect theory. Therefore, the proposed procedure is valid only for convex preferences.
Observations Regarding Choice Behaviour in Interactive Multiple Criteria Decision-Making Environments: An Experimental Investigation
1989
Many interactive procedures have been developed for solving optimization problems having multiple criteria. In such procedures, an exploration over the feasible or efficient region is conducted for locating the most preferred solution. As Steuer (1986) notes, interactive procedures are characterized by phases of decision-making alternating with phases of computation. Generally a pattern is established that we keep repeating until termination. At each iteration, a solution, or group of solutions, is generated for a decision-maker’s (DM’s) examination. Based on the examination, the DM inputs information to the solution procedure in the form of tradeoffs, pairwise comparisons, aspiration level…
Performance of Understanding: Pragmatics and Fast and Frugal Heuristics
2019
What determines the meaning of an utterance is a logical matter and as such must be treated independently of the bio-cognitive constraints that operate in our bodies. This thesis, whose great supporter was Frege, implies a clear notion of rationality that seems not to bear comparison with what we know on the limits of our rationality. Various theories (Kahneman and Tversky 1983; Gigerenzer et al., 1999), thematizing the need to consider our rationality beginning from the bio- cognitive constraints that our body imposes on a mass of information, can be of great utility for facing the problem of what type of rationality operates in phenomena of linguistic understanding (Ferreira and Patson 20…