An Empirical Test of Gain-Loss Separability in Prospect Theory
We investigate a basic premise of prospet theory: that the evaluation of gains and losses is separable. In prospect theory, gain-loss separability implies that a mixed gamble is valued by summing the valuations of the gain and loss portions of the gamble. Two experimental studies demonstrate a syste...
| Veröffentlicht in: | Management Science. - Institute for Operations Research and the Management Sciences, 1954. - 54(2008), 7, Seite 1322-1335 |
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| Format: | Online-Aufsatz |
| Sprache: | English |
| Veröffentlicht: |
2008
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| Zugriff auf das übergeordnete Werk: | Management Science |
| Schlagworte: | risky choice prospect theory mixed gambles double matching probability weighting function Behavioral sciences Mathematics Applied sciences |
| Zusammenfassung: | We investigate a basic premise of prospet theory: that the evaluation of gains and losses is separable. In prospect theory, gain-loss separability implies that a mixed gamble is valued by summing the valuations of the gain and loss portions of the gamble. Two experimental studies demonstrate a systematic violation of the double-matching axiom, an axiom that is necessary for gain-loss separability. We document a reversal between preferenes for mixed gambles and the associated gain and loss gambles-mixed gamble A is preferred to mixed gamble B, but the gain and loss portions of B are preferred to the gain and loss portions of A. The observed choice patterns are consistent with a process in which individuals are less sensitive to probabilityy differences when choosing among mixed gambles than when choosing among either gain or loss gambles. |
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| ISSN: | 15265501 |