Abstract not found

In recent years, descriptive models of risky choice have incorporated features that reflect the importance of particular outcome values in choice. Cumulative prospect theory (CPT) does this by inserting a reference point in the utility function. SP/A (security-potential/aspiration) theory uses aspiration level as a second criterion in the choice process. Experiment 1 compares the ability of the CPT and SP/A models to account for the same within-subjects data set and finds in favor of SP/A. Experiment 2 replicates the main finding of Experiment 1 in a between-subjects design. The final discussion brackets the SP/A result by showing the impact on fit of both decreasing and increasing the number of free

This study tests between two modern theories of decision making. Rank- and sign-dependent utility (RSDU) models, including cumulative prospect theory (CPT), imply stochastic dominance and two cumulative independence conditions. Configural weight models, with parameters estimated in previous research, predict systematic violations of these properties for certain choices. Experimental data systematically violate all three properties, contrary to RSDU but consistent with configural weight models. This study also tests whether violations of stochastic dominance can be explained by violations of transitivity. Violations of transitivity may be evidence of a dominance detecting mechanism. Although some transitivity violations were observed, most choice triads violated stochastic dominance without violating transitivity. Judged differences between gambles were not consistent with the CPT model. Data were not consistent with the editing principles of cancellation and combination. The main findings are interpreted in terms of coalescing, the principle that equal outcomes can be combined in a gamble by adding their probabilities. RSDU Address correspondence and reprint requests to Michael H. Birnbaum, Department of Psychology,

Subjects judged the values of lotteries from 3 points of view: the highest price that a buyer should pay, the lowest price that a seller should accept, and the "fair " price. The rank order of judgments changed as a function of point of view. Data also showed violations of branch independence and monotonicity (dominance). These findings pose difficulties for nonconfigural theories of decision making, such as subjective expected utility theory, but can be described by configural-weight theory. Configural weighting is similar to rank-dependent utility theory, except that the weight of the lowest outcome in a gamble depends on the viewpoint, and 0-valued outcomes receive differential weighting. Configural-weight theory predicted the effect of viewpoint, the violations of branch independence, and the violations of monotonicity, using a single scale of utility that is independent of the lottery and the point of view. In order to study how people evaluate and choose among alternatives, experimental psychologists have investigated judgments of lotteries. With lotteries, one can manipulate what appear to be crucial ingredients in judgment and decision making: the alternatives, the outcomes, and probabilities of the outcomes. Gambles therefore seem to provide a fruitful paradigm for the investigation of decisions (Edwards, 1954;

Among the most popular models for decision under risk and uncertainty are the rank-dependent models, introduced by Quiggin and Schmeidler. Central concepts in these models are rank-dependence and comonotonicity. It has been suggested in the literature that these concepts are technical tools that have no intuitive or empirical content. This paper describes such contents. As

Descriptive and normative modeling of decision making under risk and uncertainty have grown apart over the past decade. Psychological models attempt to accommodate the numerous violations of rationality axioms, including independence and transitivity. Meanwhile, normatively oriented decision analysts continue to insist on the applied usefulness of the subjective expected utility (SEU) model. As this gap has widened, two facts have remained largely unobserved. First, most people in real situations attempt to behave in accord with the most basic rationality principles, even though they are likely to fail in more complex situations. Second, the SEU model is likely to provide consistent and rational answers to decision problems within a given problem structure, but may not be invariant across structures. Thus, people may be more rational than the psychological literature gives them credit for, and applications of the SEU model may be susceptible to some violations of invariance principles. This paper attempts to search out the common ground between the normative, descriptive, and prescriptive modeling by exploring three types of axioms concerning structural rationality, preference rationality, and quasi-rationality. Normatively the first two are mandatory and the last, suspect. Descriptively, all have been questioned, but often the inferences involved have confounded preference and structural rationality. We propose a prescriptive view that entails full compliance with preference rationality, modifications of structural rationality, and acceptance of quasi-rationality to the extent of granting a primary role to the status quo and the decomposition of decision problems into gains and losses.

Subjective expected utility (SEU) rests on and implies four tenets of rational preferences; transitivity, monoto-nicity of consequences, independence of a common consequence, and accounting equivalences. Empirical evidence against transitivity and monotonicity is reevaluated and the opposite conclusion drawn using more recent data. The more complex accounting equivalences are descriptively implausible. The three simplest-idempotence, complementarity, and event commutativity-seem to be the only ones that may be descriptive. These, coupled with the postulate of an interval scale representation, result in a rank-dependent, weighted linear generalization of SEU. Further generalizations to nonbinary mixtures and to rank- and sign-dependent representations are also described. Problems in testing these theories are discussed.

How do human beings make wage comparisons? This paper provides empirical support for an approach suggested by the psychologist Allen Parducci. The paper combines an experimental study with an analysis of data on 16,000 British employees. Satisfaction levels are shown to depend not simply upon relative pay but upon an individual’s ordinal rank within a comparison group (for example, whether the individual is 4th or 34th in the wage hierarchy of the company). Moreover, consistent with Parducci’s theory, quits in a workplace are higher the greater is the positive skewness of the pay distribution. This research was supported by grants 88/S15050 from BBSRC (UK) and grants R000239002 and R000239351 from ESRC (UK). Any opinions in this article are those of the individual authors only; they do not necessarily reflect the views or policies of Watson Wyatt. For helpful suggestions, we are

In many theories of decision under risk (e.g., expected utility theory, rank dependent utility theory, and prospect theory) the utility or value of a prospect is independent of other prospects or options in the choice set. The experiments presented here show a large effect of the available options set, suggesting instead that prospects are valued relative to one another. The judged certainty equivalent is strongly influenced by the options available. Similarly, the selection of a preferred option from a set of prospects is strongly influenced by the prospects available. Alternative theories of decision under risk (e.g., the stochastic difference model, multialternative decision field theory, and range frequency theory), where prospects themselves or prospect attributes are valued relative to one another, can provide an account of these context effects.

The principle of maximising the expected utility has had a large influence on agent-based decision support. Even though this principle is often useful when evaluating a decision situation, it is not always the most rational decision rule and other candidates are worth considering. A decision making agent may want, for example, to exclude particular strategies which, in some sense, are too risky with respect to certain thresholds. A theory is presented for situations where a decision making agent, human or machine, has to choose between a finite set of strategies having access to a finite set of autonomous agents reporting their opinions on the strategies. The approach considers a decision problem with respect to the contents and the credibilities of the reports, and the main emphasis is on how to perform analyses in decision situations where the available information is vague or numerically imprecise. Keywords: Decision analysis, multi-agent systems, utility theory, uncertain reasoning...