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Topic: Prospect theory

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	EconPort - Handbook - Decision-Making Under Uncertainty - Prospect Theory
		Prospect theory, developed by Daniel Kahneman and Amos Tversky is perhaps the most well-known of these alternative theories.
		As long as prospects are in the positive domain, the certainty effect leads to a risk-averse preference for a sure gain, rather than one which may be larger but be merely probable.
		Prospect theory does, in fact, predict risk-aversion for small-probability losses, which is normally the case with insurance.
	www.econport.org /econport/request?page=man_ru_advanced_prospect (853 words)

	Prospect theory - Encyclopedia, History, Geography and Biography
		An important implication of prospect theory is that the way economic agents subjectively frame an outcome or transaction in their mind affects the utility they expect or receive.
		Framing and prospect theory has been applied to a diverse range of situations which appear inconsistent with standard economic rationality; the equity premium puzzle, the status quo bias, various gambling and betting puzzles, intertemporal consumption and the endowment effect.
		Another possible implication of prospect theory for economics is that utility might be reference based, in contrast with additive utility functions underlying much of neo-classical economics.
	www.arikah.com /encyclopedia/Prospect_theory (353 words)

	Prospect theory: Just the facts... (Site not responding. Last check: )
		The prospect theory was developed by Daniel Kahneman (additional info and facts about Daniel Kahneman) and Amos Tversky (additional info and facts about Amos Tversky) in 1979.
		An important implication of prospect theory is that the way economic agents subjectively frame (One of a series of still transparent photographs on a strip of film used in making movies) an outcome or transaction in their mind affects the utility they expect or receive.
		Another possible implication of prospect theory for economics is that utility (The quality of being of practical use) might be reference based, in contrast with additive utility functions underlying much of neo-classical economics (additional info and facts about neo-classical economics).
	www.absoluteastronomy.com /encyclopedia/p/pr/prospect_theory.htm (375 words)

	Untitled Document (Site not responding. Last check: )
		Furthermore, prospect theory assumes a specific form for the value function, which is risk seeking for losses and risk avoiding for gains.
		These changes allow prospect theory to explain a number of phenomena, including framing effects, certain features of the Allais paradox, and some aspects of mental accounting (the endowment effect, the "segregate gains and integrate losses" maxim, etc.) Note that prospect theory does not account for such phenomena as regret and ambiguity effects.
		In both EU theory and prospect theory, risk is determined solely by (a)nthe person's beliefs in the probability of an outcome - its probability (EU theory) or weighted probability (prospect theory), and (b) its utility (EU theory) or value (prospect theory).
	www.unc.edu /courses/2005fall/psyc/135/001/finalcomments.html (1589 words)

	Prospect theory - Wikipedia, the free encyclopedia
		The value function which passes through this point is s-shaped and, as its asymmetry implies, given the same variation in absolute value, there is a bigger impact of losses than of gains (loss aversion).
		The original version of prospect theory gave rise to violations of first-order stochastic dominance.
		A revised version, called cumulative prospect theory overcame this problem by using a probability weighting function derived from rank-dependent utility theory.
	en.wikipedia.org /wiki/Prospect_theory (487 words)

	[No title]
		In prospect theory, these two branches could be combined to form a two-branch gamble, A’, with one branch of.02 to win $100 and a second branch of.98 to win $0.
		Prospect Theory Prospect theory (Kahneman & Tversky, 1979) is similar to that of Edwards (1962), except it was restricted to gambles with no more than two nonzero consequences, and it reduced the number of pages in the book of weights to two—prospects (gambles) with and without the consequence of zero.
		Cumulative Prospect Theory (Tversky & Kahneman, 1992) was considered an advance over original prospect theory because CPT applied to gambles with more than two nonzero consequences, and because it removed the need for the editing rules of combination and dominance detection, which are automatically satisfied by the representation.
	psych.fullerton.edu /mbirnbaum/papers/BirnbaumReview37.doc (12885 words)

	Prospect theory suggests that people respond differentially to factually equivalent messages depending on how these ... (Site not responding. Last check: )
		Prospect theory suggests that people respond differentially to factually equivalent messages depending on how these messages are framed (A. Tversky & D. Kahneman, 1981).
		Rothman and P. Salovey (1997) relied on prospect theory to predict that messages highlighting potential "gains" should promote prevention behaviors such as sunscreen use best.
		People who read either of the 2 gain-framed brochures, compared with those who read either of the 2 loss-framed brochures, were significantly more likely to (a) request sunscreen, (b) intend to repeatedly apply sunscreen while at the beach, and (c) intend to use sunscreen with a sun protection factor of 15 or higher.
	camden-nt1.rutgers.edu /hart/Theory/3-01-00/sld003.htm (326 words)

	[No title] (Site not responding. Last check: )
		Prospect Theory and Rogue Regimes Christophe Guibert de Bruet Political Science 472 In this paper, I will analyze chapters one through seven of Rogue Regimes1 by Professor Raymond Tanter in light of prospect theory as formulated in Avoiding Losses/Taking Risks: Prospect Theory and International Conflict2, edited by Barbara Farnham.
		The essence of prospect theory is simple: people have such an aversion to loss that they will put more effort into avoiding a loss than they would in gaining something of equal value.
		Prospect The ory can be used in hindsight to explain otherwise incomprehensible decisions, but could influence the future of the decision-making process, were decision-makers more inclined to view the situation from their opponents' eyes.
	www-personal.umich.edu /~rtanter/S97PS472_Papers/GUIBERT_DE_BRUET.CHRISTOPHE.ROGUE_REGIMES (3119 words)

	Prospect Theory
		Under prospect theory, value is assigned to gains and losses rather than to final assets; also probabilities are replaced by decision weights.
		Prospect theory was created by two psychologists, Kahneman and Tversky, who wanted to build a parsimonious theory to fit a number of violations of classical rationality that they (and others) had uncovered in empirical work.
		Prospect theory, which was developed by Kahneman and Tversky (1979), is one of the most often quoted and best-documented phenomena in economic psychology.
	prospect-theory.behaviouralfinance.net (3692 words)

	Prospect Theory View of Framing Effects
		Prospect Theory was put forth by Tversky and Kahneman to understand Framing Effects.
		According to prospect theory, people value a certain gain more than a probable gain with an equal or greater expected value; the opposite is true for losses.
		This distinction is not apparent in Prospect Theory.
	epse501.freeservers.com /prospect_theory.htm (1281 words)

	SFB 504 glossary: Prospect theory (Site not responding. Last check: )
		Prospect theory attempts to describe decisions under uncertainty, and has also been applied to the field of social psychology.
		Prospect theory differs from expected utility theory in a number of important respects.
		Prospect theory treats preferences as a funcion of "decision weights", and it assumes that these weights do not always correspond to probabilities.
	www.sfb504.uni-mannheim.de /glossary/prospect.htm (257 words)

	[No title]
		In turn, this interpretation generates support for a popular alternative to expected utility theory called prospect theory, of which loss aversion is a major component. The existence of exchange asymmetries rests on a good empirical foundation and cannot be dismissed.
		On the other hand, if loss aversion and prospect theory account for observed asymmetries, then we should observe subjects trading to retrieve their endowed goods. 3.4 Order of Presentation The order in which the experimenter presents the goods to the subjects is another design feature we investigate.
		According to prospect theory, preferences are characterized by two fundamental features: (1) reference-point dependence (i.e., gains and losses are evaluated from some reference point), and (2) loss aversion (i.e., the notion that individuals experience more disutility from losses as they do utility from gains of the same size).
	www.utexas.edu /law/news/colloquium/papers/Zeilepaper.doc (7933 words)

	Psychology Colloquia
		Original Prospect Theory (Kahneman & Tversky, 1979) and Cumulative Prospect Theory (Tversky & Kahneman, 1992) are theories that are better descriptions of empirical choices that people make than is Expected Utility Theory, first published by Bernoulli (1738), later axiomatized by von Neuman and Morgenstern (1944), and generalized by Savage (1954).
		The chief advantages of prospect theories over expected utility theory were the ability of these models to handle the Allais paradoxes while providing a number of "editing rules" as excuses for possible violations of the models.
		It is assumed both as an editing rule in original prospect theory and it is a consequence of rank dependent utility theory, the foundation of cumulative prospect theory.
	psy.ucsd.edu /psych-talks/archive/birnbaum.html (397 words)

	Realpolitik, Prospect Theory and Genocide (Site not responding. Last check: )
		Realpolitik and prospect theory are introduced as means of understanding the onset of genocide within the context of earlier state losses and high risk.
		This symbiosis between realpolitik and prospect theory will be considered relative to the origins of the Holocaust 1941-45, the Armenian genocide of 1915-16, and that of the Tutsi of 1994.
		Consistency of prospect theory with the tenets of realpolitik is found not only in the writings of Machiavelli, but in contemporary thinking as well.
	www.isanet.org /noarchive/midlarsky.html (12430 words)

	J/DM lectures (II) - E. Pritchard
		Prospect theory is similar to EU in that the decision weight is independent of the context.
		Prospect theory predicts that changing the sign on a set of choices will result in people changing their preferences, and evidence has been found for this effect, which is called the reflection effect.
		Indeed, generally, preferences for gains are not associated with preferences for losses, which is contrary to prospect theory, which predicts that people who are risk averse for gains, then they should be risk seeking for losses.
	io.uwinnipeg.ca /~epritch1/jdm99b.htm (1347 words)

	Prospect Theory: Implications for International Mediation - Questia Online Library
		Expected utility theory is the orthodox model, a model of rational actors.
		We discuss the relevance of prospect theory to mediation of international disputes with examples.
		Prospect theory may be more relevant to rationality in international relations.
	www.questia.com /PM.qst?a=o&d=76938805 (326 words)

	Rick Harbaugh
		In gambles involving both skill and chance, we show that a strategic desire to avoid appearing unskilled generates behavioral anomalies that are typically explained by prospect theory's concepts of loss aversion, probability weighting, and framing effects.
		The results provide an alternative approach to the widespread application of prospect theory to managerial and financial decisions where both skill and chance are important.
		Such behavior and other anomalies underlying prospect theory arise from a model of local status maximization in which consumers compare their wealth with other consumers of similar wealth.
	www.bus.indiana.edu /riharbau (2432 words)

	South(west)paw: prospect theory & the new york times (Site not responding. Last check: )
		Kahneman was awarded the 2002 Nobel Prize in Economics for prospect theory - the theory of risky choice he developed with Tversky (Kahneman & Tversky, 1979; Tversky & Kahneman, 1992).
		In his 1738 paper (translated in Econometrica in 1954), he wrote, “We must strongly emphasize this truth, although it be self evident: the imprudence of a gambler will be the greater the larger the part of his fortune which he exposes to a game of chance.
		Ironically, although Kahneman and Tversky’s “prospect theory” is widely viewed as the most successful theory of risky choice, it predicts that people’s attitude toward risk is INDEPENDENT of stakes.
	debfrisch.com /archives/2005/09/prospect_theory.html (465 words)

	Read about Prospect theory at WorldVillage Encyclopedia. Research Prospect theory and learn about Prospect theory here! (Site not responding. Last check: )
		risk aversion/risk seeking in case of gains or losses (termed the reflection effect), can be explained referring to the prospect theory.
		Framing and prospect theory has been applied to a diverse range of situations which appear inconsistent with standard economic rationality; the
		Another possible implication of prospect theory for economics is that utility might be reference based, in contrast with additive utility functions underlying much of
	encyclopedia.worldvillage.com /s/b/Prospect_theory (327 words)

	The Domestic and International Dimensions of Risk: Prospect Theory and Argentina - Storming Media
		Prospect theory is a decision making theory which claims that decision makers make choices in terms of relative rather than absolute utility, based on a status-quo reference point.
		Traditionally applied at one level of analysis, this thesis applies prospect theory across both the domestic and international level, examining how losses or gains at one level can affect decisions made at the other and vice versa.
		By applying prospect theory as a two level, Argentine foreign policy appears to be based on its fall from "grace" throughout the twentieth century.
	www.stormingmedia.us /45/4527/A452724.html (259 words)

	Prospect Theory
		A theory that people value gains and losses differently and, as such, will base decisions on perceived gains rather than perceived losses.
		According to prospect theory, even though the investor is presented with the same mutual fund, he or she is more likely to buy the mutual fund from the first advisor, who expressed the rate of return as an overall 7% gain, rather a combination of both high returns and losses.
		Behavioral Finance: Propect Theory - According to prospect theory, losses have more emotional impact than an equivalent amount of gains.
	www.investopedia.com /terms/p/prospecttheory.asp (375 words)

	[No title]
		Starmer (2000) reviews several recent theories for decision under risk on their merits as descriptive models of choice, and highlights the advantages of rank- and sign-dependence as they are combined in CPT.
		While under the EU theory risk aversion is equivalent to a concave utility function, it has become clear that under the RDU concavity of the utility function is achieved only with strong risk aversion (Chew, Karni and Safra 1987, Chateauneuf and Cohen 1994).
		It is important to fully understand cumulative prospect theory, a decision model which is appealing and, as it has been shown elsewhere, has an impressive predictive power.
	www.huebnergeneva.org /documents/schmidt&zank.txt (6003 words)

	[No title] (Site not responding. Last check: )
		Prospect theory incorporates the lessons of psychology in order to explain why an actor, facing specific alternatives with unique probabilities and utilities, would make a decision that seems not be in his or her best interest.
		The central holding of prospect theory is that humans are risk-averse when they are in a position (domain) of gain, and risk-acceptant when they are in a domain of loss.
		s actions from the perspective of prospect theory, her pursuit of nuclear proliferation in the face of a credible international deterrent is no longer a puzzle.
	www-personal.umich.edu /~moberge/iran/part4.html (3187 words)

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