![]() Overweighting of low probabilities may contribute to the attractiveness of both insurance and gambling. Decision weights are generally lower than the corresponding probabilities, except in the range of low probabilities. The value function is normally concave for gains, commonly convex for losses, and is generally steeper for losses than for gains. 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. ![]() This tendency, called the isolation effect, leads to inconsistent preferences when the same choice is presented in different forms. In addition, people generally discard components that are shared by all prospects under consideration. 47th Rule of Acquisition 59th Rule of Acquisition Picard, Close up with Silver Background The The post STFC Anthology - 5/6 Game News appeared first on. 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 particular, people underweight outcomes that are merely probable in comparison with outcomes that are obtained with certainty. Choices among risky prospects exhibit several pervasive effects that are inconsistent with the basic tenets of utility theory. 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.
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