Overview

This book presents the definitive exposition of 'prospect theory', a compelling alternative to the classical utility theory of choice. Building on the 1982 volume, Judgement Under Uncertainty, this book brings together seminal papers on prospect theory from economists, decision theorists, and psychologists, including the work of the late Amos Tversky, whose contributions are collected here for the first time. While remaining within a rational choice framework, prospect theory delivers more accurate, empirically ...
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Choices, Values, and Frames

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Overview

This book presents the definitive exposition of 'prospect theory', a compelling alternative to the classical utility theory of choice. Building on the 1982 volume, Judgement Under Uncertainty, this book brings together seminal papers on prospect theory from economists, decision theorists, and psychologists, including the work of the late Amos Tversky, whose contributions are collected here for the first time. While remaining within a rational choice framework, prospect theory delivers more accurate, empirically verified predictions in key test cases, as well as helping to explain many complex, real-world puzzles. In this volume, it is brought to bear on phenomena as diverse as the principles of legal compensation, the equity premium puzzle in financial markets, and the number of hours that New York cab drivers choose to drive on rainy days. Theoretically elegant and empirically robust, this volume shows how prospect theory has matured into a new science of decision making.
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Editorial Reviews

From the Publisher
"Daniel Kahneman and the late Amos Tversky have started a new perspective on the traditional economic categories of choice, decision, and value. A series of experimental and empirical studies by them and others have rejected traditional economic assumptions of rationality. Even more importantly, these scholars have developed alternative generalizations with significant predictive power and have found empirical verification for them. This outstanding collection of studies will make these new results widely accessible." Kenneth J. Arrow, Joan Kenney Professor of Economics, Emeritus and Professor of Operations Research, Emeritus, Stanford University
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Product Details

  • ISBN-13: 9781107702301
  • Publisher: Cambridge University Press
  • Publication date: 10/29/2013
  • Sold by: Barnes & Noble
  • Format: eBook
  • Edition number: 1
  • Sales rank: 917,209
  • File size: 11 MB
  • Note: This product may take a few minutes to download.

Table of Contents

Preface
List of Contributors
1 Choices, Values, and Frames 1
2 Prospect Theory: An Analysis of Decision under Risk 17
3 Advances in Prospect Theory: Cumulative Representation of Uncertainty 44
4 Compound Invariant Weighting Functions in Prospect Theory 67
5 Weighing Risk and Uncertainty 93
6 A Belief-Based Account of Decision under Uncertainty 118
7 Loss Aversion in Riskless Choice: A Reference-Dependent Model 143
8 Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias 159
9 The Endowment Effect and Evidence of Nonreversible Indifference Curves 171
10 A Test of the Theory of Reference-Dependent Preferences 180
11 Diminishing Marginal Utility of Wealth Cannot Explain Risk Aversion 202
12 Rational Choice and the Framing of Decisions 209
13 Framing, Probability Distortions, and Insurance Decisions 224
14 Mental Accounting Matters 241
15 Toward a Positive Theory of Consumer Choice 269
16 Prospect Theory in the Wild: Evidence from the Field 288
17 Myopic Loss Aversion and the Equity Premium Puzzle 301
18 Fairness as a Constraint on Profit Seeking: Entitlements in the Market 317
19 Money Illusion 335
20 Labor Supply of New York City Cab Drivers: One Day at a Time 356
21 Are Investors Reluctant to Realize Their Losses? 371
22 Timid Choices and Bold Forecast: A Cognitive Perspective on Risk Taking 393
23 Overconfidence and Excess Entry: An Experimental Approach 414
24 Judicial Choice and Disparities between Measures of Economic Values 424
25 Contrasting Rational and Psychological Analyses of Political Choice 451
26 Conflict Resolution: A Cognitive Perspective 473
27 The Construction of Preference 489
28 Contingent Weighting in Judgment and Choice 503
29 Context-Dependent Preferences 518
30 Ambiguity Aversion and Comparative Ignorance 528
31 Attribute Evaluability: Its Implications for Joint-Separate Evaluation Reversals and Beyond 543
32 Preferences for Sequences of Outcomes 565
33 Anomalies in Intertemporal Choice: Evidence and an Interpretation 578
34 Reason-Based Choice 597
35 Value Elicitation: Is There Anything in There? 620
36 Economic Preferences of Attitude Expressions? An Analysis of Dollar Responses to Public Issues 642
37 Experienced Utility and Objective Happiness: A Moment-Based Approach 673
38 Evaluation by Moments: Past and Future 693
39 Endowments and Contrast in Judgments of Well-Being 709
40 A Bias in the Prediction of Tastes 726
41 The Effect of Purchase Quantity and Timing on Variety-Seeking Behavior 735
42 New Challenges to the Rationality Assumption 758
References 775
Author Index 821
Subject Index 832
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