常见的文献选读-Prospect Theory An Analysis of Decision Under Risk.pptVIP

Prospect Theory: An Analysis of Decision Under Risk Teacher: Prof. Yuanlue Fu Student: Liang Lizhen Prospect Theory: An Analysis of Decision Under Risk Author: Daniel Kahneman: The University of British Columbia Amos Tversky: Stanford University Journal: Econometrica Time : 1979，Vol. 47(2) Present a critique of expected utility theory as a descriptive model of decision making under risk, and develop an alternative model, called prospect theory. Why to select? “for having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty.” Outline Introduction of expected utility theory Critiques of expected utility theory Prospect theory: Value function Weight function Applications Discussion Some Definitions A prospect (x1,p1;…;xn,pn) is a contract that yields outcome xi with probability pi, where p1+p2+…+pn=1. Use (x,p) to denote the prospect (x,p;0,1-p) that yields x with probability p and 0 with probability 1-p. The (riskless) prospect that yields x with certainty is denoted by (x). Tenets of expected utility theory Expectation: U(x1,p1;…;xn,pn)=p1u(x1)+…+pnu(xn). -Implying the independence axiom Asset Integration: (x1,p1;…;xn;pn) is acceptable at asset position w iff U(w+x1,p1;…;w+xn,pn)u(w) -the domain of the utility function is final states rather than gains and losses. Risk Aversion: u is concave (u’’0) Violation of Expected Utility Theory Certainty, Probability, and Possibility Certainty Effect: people overweight outcomes that are considered certain, relative to outcomes which are merely probable. Certainty, Probability, and Possibility Problem 1: Choose between A: 2500 with probability .33 B: 2400 with certainty 2400 with probability .66 0 with probability .01 N=72 [18] [82]* Problem 2: Choose between C: 2500 with probability