Prospect Theory, Mental Accounting, and Differences in Aggregated and Segregated Evaluation of Lottery Portfolios

Prospect Theory, Mental Accounting, and Differences in Aggregated and Segregated Evaluation of Lottery Portfolios

If individuals have to evaluate a sequence of lotteries, their judgment is influenced by the presentation mode. Experimental studies have found significantly higher acceptance rates for a sequence of lotteries if the overall distribution was displayed instead of the set of lotteries itself. Mental a...

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Veröffentlicht in:Management Science. - Institute for Operations Research and the Management Sciences, 1954. - 47(2001), 5, Seite 716-733
1. Verfasser: Langer, Thomas (VerfasserIn)
Weitere Verfasser: Weber, Martin
Format: Online-Aufsatz
Sprache:English
Veröffentlicht: 2001
Zugriff auf das übergeordnete Werk:Management Science
Schlagworte:Prospect Theory Mental Accounting Evaluation Procedures Behavioral sciences Philosophy Economics Mathematics Law
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520 |a If individuals have to evaluate a sequence of lotteries, their judgment is influenced by the presentation mode. Experimental studies have found significantly higher acceptance rates for a sequence of lotteries if the overall distribution was displayed instead of the set of lotteries itself. Mental accounting and loss aversion provide an easy and intuitive explanation for this phenomenon. In this paper we offer an explanation that incorporates further evaluation concepts of Prospect Theory. Our formal analysis of the difference in aggregated and segregated portfolio evaluation demonstrates that the higher attractiveness of the aggregated presentation mode is not a general phenomenon (as suggested in the literature) but depends on specific parameters of the lotteries. The theoretical findings are supported by an experimental study. In contrast to the existing evidence and in line with our theoretical results, we find for specific types of lotteries an even lower acceptance rate if the overall distribution is displayed. 
540 |a Copyright 2001 INFORMS 
650 4 |a Prospect Theory 
650 4 |a Mental Accounting 
650 4 |a Evaluation Procedures 
650 4 |a Behavioral sciences  |x Leisure studies  |x Recreation  |x Games  |x Gambling  |x Lotteries 
650 4 |a Behavioral sciences  |x Sociology  |x Social organization  |x Segregation 
650 4 |a Behavioral sciences  |x Behavioral economics  |x Prospect theory 
650 4 |a Behavioral sciences  |x Behavioral economics  |x Prospect theory  |x Loss aversion 
650 4 |a Philosophy  |x Applied philosophy  |x Philosophy of science  |x Scientific method  |x Experimentation 
650 4 |a Behavioral sciences  |x Behavioral economics  |x Consumer behavior  |x Consumer sovereignty  |x Mental accounting 
650 4 |a Economics  |x Economic disciplines  |x Financial economics  |x Finance  |x Financial analysis  |x Risk management  |x Risk aversion 
650 4 |a Mathematics  |x Applied mathematics  |x Statistics  |x Applied statistics  |x Inferential statistics  |x Expected values 
650 4 |a Economics  |x Economic disciplines  |x Financial economics  |x Finance  |x Financial management  |x Financial risk  |x Investment risk 
650 4 |a Law  |x Civil law  |x Civil damages  |x Compensatory damages  |x Diminution in value 
655 4 |a research-article 
700 1 |a Weber, Martin  |e verfasserin  |4 aut 
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