Prospect Theory: An Analysis of Decision under Risk
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.
Technosocial Predictive Analytics in Support of Naturalistic Decision Making
Abstract
Motivation – Anticipate outcomes through predictive and proactive reasoning across domains as diverse as energy, security, the environment, health and finance in order to maximize opportunities and counter adversities.
Subjective Probability: A Judgment of Representativeness
This paper explores a heuristic-representativeness-according to which the subjective probability of an event, or a sample, is determined by the degree to which it: (i) is similar in essential characterisitcs to its parent population; and (ii) reflects the salient features of the process by which it is generated. This heuristic is explicated in a series of empirical examples demonstrating predictable and systematic errors i the evaluation of uncertain events.
Affect, Risk, and Decision Making
Risk is perceived and acted on in 2 fundamental ways. Risk as feelings refers to individuals’ fast, instinctive, and intuitive reactions to danger. Risk as analysis brings logic, reason, and scientific deliberation to bear on risk management. Reliance on risk as feelings is described with “the affect heuristic.” The authors trace the development of this heuristic across a variety of research paths.
The Framing of Decisions and the Psychology of Choice
Summary. The psychologicalprinciplesthat govern the perceptionof decision prob- lems and the evaluation of probabilities and outcomes produce predictable shifts of preference when the same problem is framed in different ways. Reversals of prefer- ence are demonstrated in choices regarding monetary outcomes, both hypothetical and real, and in questions pertaining to the loss of human lives.