Thu, 21 Aug 2008 09:52:06 BST CiteULike: klouie's Kahneman http://www.citeulike.org/user/klouie/author/Kahneman CiteULike.org en-gb Copyright © 2004-2008 citeulike.org http://www.citeulike.org/user/klouie/article/100015 <i></i> Judgment under Uncertainty: Heuristics and Biases Amos Tversky Daniel Kahneman 2005-02-21T15:33:59-00:00 choicebehavior economics human uncertainty http://www.citeulike.org/user/klouie/article/100010 <i>Science, Vol. 211, No. 4481. (30 January 1981), pp. 453-458.</i><br /><br />The psychological principles that govern the perception of decision problems and the evaluation of probabilities and outcomes produce predictable shifts of preference when the same problem is framed in different ways. Reversals of preference are demonstrated in choices regarding monetary outcomes, both hypothetical and real, and in questions pertaining to the loss of human lives. The effects of frames on preferences are compared to the effects of perspectives on perceptual appearance. The dependence of preferences on the formulation of decision problems is a significant concern for the theory of rational choice. The framing of decisions and the psychology of choice. A Tversky D Kahneman doi:10.1126/science.7455683 Science, Vol. 211, No. 4481. (30 January 1981), pp. 453-458. 2005-02-21T15:30:45-00:00 1981 Science 0036-8075 211 4481 453 458 choicebehavior economics framing human http://www.citeulike.org/user/klouie/article/99680 <i>Econometrica, Vol. 47, No. 2. (1979), pp. 263-292.</i><br /><br />This paper presents a critique of expected utility theory as a descriptive model of decision making under risk, and develops an alternative model, called prospect theory. Choices among risky prospects exhibit several pervasive effects that are inconsistent with the basic tenets of utility theory. In particular, people underweight outcomes that are merely probable in comparison with outcomes that are obtained with certainty. This tendency, called the certainty effect, contributes to risk aversion in choices involving sure gains and to risk seeking in choices involving sure losses. In addition, people generally discard components that are shared by all prospects under consideration. This tendency, called the isolation effect, leads to inconsistent preferences when the same choice is presented in different forms. An alternative theory of choice is developed, in which value is assigned to gains and losses rather than to final assets and in which probabilities are replaced by decision weights. The value function is normally concave for gains, commonly convex for losses, and is generally steeper for losses than for gains. Decision weights are generally lower than the corresponding probabilities, except in the range of low probabilities. Overweighting of low probabilities may contribute to the attractiveness of both insurance and gambling. Prospect Theory: An Analysis of Decision under Risk Daniel Kahneman Amos Tversky Econometrica, Vol. 47, No. 2. (1979), pp. 263-292. 2005-02-20T19:58:05-00:00 1979 Econometrica 47 2 263 292 choicebehavior economics human risk utility