Experimental test of the prospect theory value function: A stochastic dominance approach

According to prospect theory, individuals are risk averse regarding gains but risk seeking regarding losses, implying an S-shaped value function. The S-shaped value function hypothesis is based on experiments in which subjects are asked to choose separately between alternatives with either only positive or only negative outcomes, alternatives which rarely exist in the capital market. In addition, the S-shaped findings may be biased by the “certainty effect” and by probability distortion. In this paper we employ the recently developed prospect stochastic dominance criterion to test the prospect theory S-shaped value function hypothesis with mixed outcomes and with no “certainty effect.” Assuming that subjects do not distort moderate probabilities, we strongly reject the prospect theory S-shaped value function, with at least 76–86% of the choices being inconsistent with such preferences. When possible subjective probability distortions are taken into account, we find that at least 50–66% of the choices are inconsistent with an S-shaped value function.     

Inverting Intentional Content

Critics of wide functionalism havetraditionally sought to attack the theory byexposing weaknesses in its account of the qualitative content of experience. Widefunctionalist theories of intentionalcontent, however, were spared philosophicalscrutiny. I propose that wide functionalistaccounts of the intentional content are equallysusceptible to attack. I will attempt todemonstrate this by enlisting thefunctionalist's old foe from the qualia wars –the inverted spectrum hypothesis – in a newway. If the argument is sound, not only will Ihave shown that the inverted spectrumhypothesis may have more use than philosophicalliterature recognizes, I will have also exposeda weakness in a dominant philosophical theory:the wide functionalist theory of intentionalcontent.     

Car following from the driver’s perspective

In this commentary, it is argued that the car following models discussed in Brackstone, M., and McDonald, M. (Transportation Research – Part F (2000), pp. 181–196) ignore one or more of the following issues that characterize to observed driver behavior. These include: (i) car following is only one of many tasks that drivers perform simultaneously and receives therefore only intermittent attention and control (task scheduling/attention management), (ii) drivers are satisfied with a range of conditions that extend beyond the boundaries imposed by perceptual and control limitation (satisficing instead of optimal performance evaluation), and (iii) in each driving task drivers use a set of highly informative perceptual variables to guide decision making and control (perceptual rather than Newtonian input). To elucidate these issues, a general driver modeling framework is presented in which the car-following task is highlighted (Boer, E. R., & Hoedemaeker, M. (1998). In Proceedings of the XVIIth European Annual Conference on Human Decision making and Manual Control December 14–16. France: Valenciennes; Boer, E. R., Hildreth, E. C., & Goodrich, M. A. (1998). In Proceedings of the XVIIth European Annual Conference on Human Decision making and Manual Control December 14–16. France: Valenciennes).     

Actualism and Higher-Order Worlds

It has been argued that actualism – the view that there are no non-actual objects – cannot deal adequately with statementsinvolving iterated modality, because such claims require reference, either explicit or surreptitious, to non-actualobjects. If so, actualists would have to reject the standard semantics for quantified modal logic (QML). In this paper I develop an account of modality which allows the actualist tomake sense of iterated modal claims that are ostensibly aboutnon-actual objects. Every occurrence of a modal operatorinvolves the stipulation of a possible world, and nestedmodal operators require stipulation of nested possible worlds.I provide an actualistically acceptable (AA) semantics for QMLwherein the nesting relation is irreflexive and intransitive and forms a tree. Despite these restrictions, AA models can beshown to be sound and complete for a wide variety of modal logics.     

A signal detection framework for the evaluation of probabilistic forecasts

In this paper I formulate an approach for evaluating probabilistic forecasts in terms of signal detection theory. Signal detection theory provides a powerful perspective for this type of problem, and a rich empirical background including methodological tools as well as an extensive body of research in many domains. I propose procedures which emphasize the maximization of expected utility for the decision maker who uses the forecasts. Further, I suggest approaches to obtaining indices of calibration and resolution within this framework. I also present arguments that the proposed indices will exhibit the same basic properties as do decompositions of Brier's (1950, Monthly Weather Review, 78, 1–3) mean probability score. However, the properties may be reflected in different ways, and hence, the present methods may lead to different conclusions about forecasting ability. Finally, I argue that the use of an expected utility loss function makes this approach more appropriate for practical applications as well as for theoretical research than other procedures with more arbitrary loss functions.     

Managers' Reactions to Utility Analysis and Perceptions of What Influences Their Decisions

Recent research on providing utility analysis (UA) information has shown small positive effects on acceptance of selection tests by human resource decision-makers (Carson, Becker, & Henderson, Journal of Applied Psychology, 83 84–96 (1998). In the present study, 218 managers provided reactions to UA information. Not only do our findings replicate the positive effects of UA, we found managers also responded favorably to UA information when asked independently of the decision making process. Specifically, when asked to rank order information in terms of what they perceived to be most influential in helping them make their final decisions, those who received UA information ranked it among the highest.     

Reference point adaptation: Tests in the domain of security trading

According to prospect theory [Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk, Econometrica, 47, 263–292], gains and losses are measured from a reference point. We attempted to ascertain to what extent the reference point shifts following gains or losses. In questionnaire studies, we asked subjects what stock price today will generate the same utility as a previous change in a stock price. From participants’ responses, we calculated the magnitude of reference point adaptation, which was significantly greater following a gain than following a loss of equivalent size. We also found the asymmetric adaptation of gains and losses persisted when a stock was included within a portfolio rather than being considered individually. In studies using financial incentives within the BDM procedure [Becker, G. M., DeGroot, M. H., & Marschak, J. (1964). Measuring utility by a single-response sequential method. Behavioral Science, 9(3), 226–232], we again noted faster adaptation of the reference point to gains than losses. We related our findings to several aspects of asset pricing and investor behavior.     

Framing and Group Decision-Making: Do Cognitive Changes Parallel Preference Changes?

Subjects had their initial frames of reference concerning a decision problem (Asian Disease problem; Tversky & Kahneman, 1981, Science,211, 453–458) manipulated in order to compose four-person groups containing members with different frames of reference. Three different group compositions (number of members with "gain-oriented" vs "loss-oriented" frames) were used: three gain-oriented and one loss oriented (3–1), two gain-oriented and two loss-oriented (2–2), and one gain-oriented and three loss-oriented (1–3). Results indicated a postgroup discussion choice shift toward the risk alternative in the 2–2 and the 1–3 composition conditions. However, changes in members′ frames of reference were unrelated to preference changes. Group composition also affected group decision processes. Implications for future theory and research in small group decision-making are discussed.     

Standard Decision Theory Corrected

Where there are infinitely many possible basic states of the world, a standard probability function must assign zero probability to each state – since any finite probability would sum to over one. This generates problems for any decision theory that appeals to expected utility or related notions. For it leads to the view that a situation in which one wins a million dollars if any of a thousand of the equally probable states is realized has an expected value of zero (since each such state has probability zero). But such a situation dominates the situation in which one wins nothing no matter what (which also has an expected value of zero), and so surely is more desirable. I formulate and defend some principles for evaluating options where standard probability functions cannot strictly represent probability – and in particular for where there is an infinitely spread, uniform distribution of probability. The principles appeal to standard probability functions, but overcome at least some of their limitations in such cases.     

Externalism, the environment, and thought-tokens

In “Contents just are in the head” (Erkenntnis 54, pp. 321–4.) I have presented two arguments against the thesis of semantic externalism. In “Contents just aren’t in the head” Anthony Brueckner has argued that my arguments are unsuccessful, since they rest upon some misconceptions regarding the nature of this thesis. (Erkenntnis 58, pp. 1–6.) In the present paper I will attempt to clarify and strengthen the case against semantic externalism, and show that Brueckner misses the point of my arguments.     

幸福的体验效用与非理性决策行为的偏差机制

基于体验效用的幸福包括预期幸福、即时幸福和回忆幸福,这三者有极其重要的本质差异,导致决策偏差和非理性。本研究运用行为科学和认知神经科学相结合的研究方法,首次从行为层次—信息加工层次—脑神经层次三个层面,立体地开展幸福感的体验效用与非理性决策行为研究。研究计划分为三个部分:(1)预期幸福、即时幸福和回忆幸福的本质特点和行为规律;(2)三种体验效用产生偏差的认知心理机制;(3)体验效用与非理性决策偏差的脑神经机制。通过系列研究,拟解决三个关键问题:(1)在人类判断与决策过程中,预期、即时和回忆三种效用是如何影响人们的判断与决策?(2)三种体验效用出现偏差的信息加工特点和脑神经机制究竟是什么?(3)三种效用的偏差规律及对政府公共政策的启示。对这些问题的深入探讨,不仅对决策理论研究的发展是一个贡献;对政府管理制定有效的公共政策,避免"牺牲体验追求指标",解决"幸福悖论",同样有很强的实践指导意义。     

Loss aversion and perceptual risk aversion

We prove that, in cumulative prospect theory, the weak loss aversion for S-shaped value functions is equivalent to a notion of risk aversion that we define from the perceptual point of view. No additional assumption or condition on the probability distortion is needed. It is demonstrated that a power S-shaped value function does not satisfy weak loss aversion, i.e., a decision maker is risk seeking with respect to some mixed sign lotteries.     

Kim On Reduction

In Mind in a Physical World (1998), Jaegwon Kim has recently extended his ongoing critique of `non-reductive materialist' positions in philosophy of mind by arguing that Nagel's model of reduction is the wrong paradigm in terms of which to contest the issue of psychophysical reduction, and that an altogether different model of scientific reduction – a functional model of reduction – is needed. In this paper I argue, first, that Kim's conception of the Nagelian model is substantially impoverished and potentially misleading; second, that his own functional model is problematic in several respects; and, third, that the basic idea underlying his functional model can well be accommodated within a properly reinterpreted Nagelian model. I conclude with some reflections on the issue of psychophysical reduction.     

决策的三参照点理论:从原理到应用

三参照点理论(Tri-Reference Point Theory,Wang,2008a; Wang& Johnson,2012)以底线、现状和目标为参照点,将决策结果空间划分为失败、损失、获益和成功4个功能区域.根据3个参照点的心理权重的排序:底线＞目标＞现状,该模型继而推导出跨越不同区域的以现状为分界的双S-型的价值函数,以及据此产生的对于跨越不同参照点的预期结果的偏好转换、和损失-获益及失败-成功的两种不对称性.总之,风险决策的基本任务在于,在使得达到目标的可能性最大化的同时使底线不保的可能性最小化.三参照点理论将统计学和金融学中的均值与方差(均差)分析与行为决策研究中的参照点效应有机地结合在一起;在面对不同的风险选项时,通过分析各个预期结果的均差分布与3个参照点之间的关系作出适应性的决策.本文介绍了三参照点理论的基本推论、运行原则、实证检验、以及它与期望效用理论和前景理论相比较的异同之处.同时我们也探讨了三参照点理论对实践中管理决策的指导意义和多重启示.     

The Age of Discoveries and Patriotism: James Darmesteter's Assessment of French Orientalism

The rapid development of Orientalism in the nineteenth century played a fundamental role in the expansion of our prior conceptions of various religious traditions. In this article, I will analyse James Darmesteter's assessment of the development of French Orientalism. He discussed this issue in his Essais orientaux (1883a). First, I will describe the discoveries mentioned by Darmesteter. Second, I will highlight his comments about the contributions of French scholars to the development of orientalism. Finally, I will analyse the relation between the Franco–German War (1870–71) and Darmesteter's Essais. The article will show that the military vocabulary used by Darmesteter is a clear indication of the impact of the war on his writing.     

Rumors and stable-cause attribution in prediction and behavior

Two stock-market simulation experiments investigated the notion that rumors that invoke stable-cause attributions spawn illusory associations and less regressive predictions and behavior. In Study 1, illusory perceptions of association and stable causation (rumors caused price changes on the day after they appeared) existed despite rigorous conditions of nonassociation (price changes were unrelated to rumors). Predictions (recent price trends will continue) and trading behavior (departures from a strong buy-low–sell-high strategy) were both anti-regressive. In Study 2, stability of attribution was manipulated via a computerized tutorial. Participants taught to view price-changes as caused by stable forces predicted less regressively and departed more from buy-low–sell-high trading patterns than those taught to perceive changes as caused by unstable forces. Results inform a social cognitive and decision theoretic understanding of rumor by integrating it with causal attribution, covariation detection, and prediction theory.     

Recycling, evolution and the structure of human personality

Concomitant with the recent surge in environmental awareness of the industrialized world, social scientists have begun searching for the determinants of recycling behavior. Although the efforts of these scientists – most notably, environmental psychologists – are commendable, they have as yet not isolated the strategies by which long-term recycling can be effectively encouraged. In this article, I comment that by giving proper attention to the evolved structure of human personality, the emerging paradigm of evolutionary psychology may have something to offer those wishing to encourage durable and generalizable recycling behavior.     

What you don’t know won’t hurt me: Costly (but quiet) exit in dictator games

We used simple economic games to examine pro-social behavior and the lengths that people will take to avoid engaging in it. Over two studies, we found that about one-third of participants were willing to “exit” a $10 dictator game and take $9 instead. The exit option left the receiver nothing, but also ensured that the receiver never knew that a dictator game was to be played. Because most social utility models are defined over monetary outcomes, they cannot explain choosing the ($9, $0) exit outcome over the dominating $10 dictator game, since the game includes outcomes of ($10, $0) and ($9, $1). We also studied exiting using a “private” dictator game. In the private game, the receiver never knew about the game or from where any money was received. Gifts in this game were added innocuously to a payment for a separate task. Almost no dictators exited from the private game, indicating that receivers’ beliefs are the key factor in the decision to exit. When, as in the private game, the receivers’ beliefs and expectations cannot be manipulated by exit, exit is seldom taken. We conclude that giving often reflects a desire not to violate others’ expectations rather than a concern for others’ welfare per se. We discuss the implications of our results for understanding ethical decisions and for testing and modeling social preferences. An adequate specification of social preferences should include “psychological” payoffs that directly incorporate beliefs about actions into the utility function.     

Out of Control: Visceral Influences on Behavior

Understanding discrepancies between behavior and perceived self-interest has been one of the major, but largely untackled, theoretical challenges confronting decision theory from its infancy to the present. People often act against their self-interest in full knowledge that they are doing so; they experience a feeling of being “out of control.” This paper attributes this phenomenon to the operation of “visceral factors,” which include drive states such as hunger, thirst and sexual desire, moods and emotions, physical pain, and craving for a drug one is addicted to. The defining characteristics of visceral factors are, first, a direct hedonic impact (which is usually negative), and second, an effect on the relative desirability of different goods and actions. The largely aversive experience of hunger, for example, affects the desirability of eating, but also of other activities such as sex. Likewise, fear and pain are both aversive, and both increase the desirability of withdrawal behaviors. The visceral factor perspective has two central premises: First, immediately experienced visceral factors have a disproportionate effect on behavior and tend to “crowd out” virtually all goals other than that of mitigating the visceral factor. Second, people underweigh, or even ignore, visceral factors that they will experience in the future, have experienced in the past, or that are experienced by other people. The paper details these two assumptions, then shows how they can help to explain a wide range of phenomena: impulsivity and self-control, drug addiction, various anomalies concerning sexual behavior, the effect of vividness on decision making, and certain phenomena relating to motivation and action.