Constraints on the representation of gambles in prospect theory

DOI10.1016/0022-2496(87)90022-8MaRDI QIDQ1095017zbMATH OpenOpenAlexFDO

Authors John M. Miyamoto

Publication date 1987

Published in Journal of Mathematical Psychology (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1016/0022-2496(87)90022-8

zbMATH Keywords

irregular gamblesprospect theorysubjective value of a gamble

Mathematics Subject Classification ID

Utility theory (91B16)

Review text

\textit{D. Kahneman} and \textit{A. Tversky}'s prospect theory [Econometrica 47, 263-291 (1979; Zbl 0411.90012)] postulates that the subjective value of a gamble is determined by different combination rules depending on the outcomes of the gamble. The theory distinguishes regular from irregular gambles, and in addition, distinguishes two different kinds of irregular gambles. The representations of value for these classes of gambles are formally analogous, but they differ in the way that gamble probabilities are integrated with the worth of gamble outcomes. The present work identifies properties of preference, restricted betweenness and equivalence under interchange, that play a central role in justifying the use of different combination rules for different classes of gambles in prospect theory.

Recommendations

• Constrained gaming approaches to decisionmaking under uncertainty
• Violations of cumulative prospect theory in mixed gambles with moderate probabilities
• Preferences on gambles representable by a Choquet expected value with respect to conditional belief and plausibility functions
• Gambling Under Unknown Probabilities as Proxy for Real World Decisions Under Uncertainty
• On the representation of incomplete preferences over risky alternatives
• The representative bettor, bet size, and prospect theory
• Sets of desirable gambles: conditioning, representation, and precise probabilities
• Distorted probabilities and choice under risk
• Totally convex preferences for gambles.

Cites work

• scientific article; zbMATH DE number 3137856 (Why is no real title available?)
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• Le Comportement de l'Homme Rationnel devant le Risque: Critique des Postulats et Axiomes de l'Ecole Americaine
• Prospect Theory: An Analysis of Decision under Risk
• Tests of the betweenness property of expected utility

Cited in

(2)

• Generic utility theory: Measurement foundations and applications in multiattribute utility theory
• Trichotomous preferences for gambles

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