An Experimental Comparison of Risky and Riskless Choice—Limitations of Prospect Theory and Expected Utility Theory

B-Tier
Journal: American Economic Journal: Microeconomics
Year: 2019
Volume: 11
Issue: 3
Pages: 34-67

Authors (3)

Hui-Kuan Chung (not in RePEc) Paul Glimcher (not in RePEc) Agnieszka Tymula (University of Sydney)

Score contribution per author:

0.670 = (α=2.01 / 3 authors) × 1.0x B-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

Prospect theory, used descriptively for decisions under both risk and certainty, presumes concave utility over gains and convex utility over losses, a pattern widely seen in lottery tasks. Although such discontinuous gain-loss reference-dependence is also used to model riskless choices, only limited empirical evidence supports this use. In incentive-compatible experiments, we find that gain-loss reflection effects are not observed under riskless choice as predicted by prospect theory, even while in the same subjects gain-loss reflection effects are observed under risk. Our empirical results challenge the application of choice models across both risky and riskless domains.

Technical Details

RePEc Handle
repec:aea:aejmic:v:11:y:2019:i:3:p:34-67
Journal Field
General
Author Count
3
Added to Database
2026-01-25