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Choices, Values, and Frames
TL;DR: Prospect theory as mentioned in this paper is an alternative to the classical utility theory of choice, and has been used to explain many complex, real-world puzzles, such as the principles of legal compensation, the equity premium puzzle in financial markets, and the number of hours that New York cab drivers choose to drive on rainy days.
Abstract: This book presents the definitive exposition of 'prospect theory', a compelling alternative to the classical utility theory of choice. Building on the 1982 volume, Judgement Under Uncertainty, this book brings together seminal papers on prospect theory from economists, decision theorists, and psychologists, including the work of the late Amos Tversky, whose contributions are collected here for the first time. While remaining within a rational choice framework, prospect theory delivers more accurate, empirically verified predictions in key test cases, as well as helping to explain many complex, real-world puzzles. In this volume, it is brought to bear on phenomena as diverse as the principles of legal compensation, the equity premium puzzle in financial markets, and the number of hours that New York cab drivers choose to drive on rainy days. Theoretically elegant and empirically robust, this volume shows how prospect theory has matured into a new science of decision making.
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TL;DR: Wilson's (1967) review of the area of subjective well-being (SWB) advanced several conclusions regarding those who report high levels of "happiness". A number of his conclusions have been overturned: youth and modest aspirations no longer are seen as prerequisites of SWB.
Abstract: W. Wilson's (1967) review of the area of subjective well-being (SWB) advanced several conclusions regarding those who report high levels of "happiness". A number of his conclusions have been overturned: youth and modest aspirations no longer are seen as prerequisites of SWB. E. Diener's (1984) review placed greater emphasis on theories that stressed psychological factors. In the current article, the authors review current evidence for Wilson's conclusions and discuss modern theories of SWB that stress dispositional influences, adaptation, goals, and coping strategies. The next steps in the evolution of the field are to comprehend the interaction of psychological factors with life circumstances in producing SWB, to understand the causal pathways leading to happiness, understand the processes underlying adaptation to events, and develop theories that explain why certain variables differentially influence the different components of SWV (life satisfaction, pleasant affect, and unpleasant affect).
9,254 citations
Book•
08 Sep 2020TL;DR: A review of the comparative database from across the behavioral sciences suggests both that there is substantial variability in experimental results across populations and that WEIRD subjects are particularly unusual compared with the rest of the species – frequent outliers.
Abstract: Behavioral scientists routinely publish broad claims about human psychology and behavior in the world's top journals based on samples drawn entirely from Western, Educated, Industrialized, Rich, and Democratic (WEIRD) societies. Researchers - often implicitly - assume that either there is little variation across human populations, or that these "standard subjects" are as representative of the species as any other population. Are these assumptions justified? Here, our review of the comparative database from across the behavioral sciences suggests both that there is substantial variability in experimental results across populations and that WEIRD subjects are particularly unusual compared with the rest of the species - frequent outliers. The domains reviewed include visual perception, fairness, cooperation, spatial reasoning, categorization and inferential induction, moral reasoning, reasoning styles, self-concepts and related motivations, and the heritability of IQ. The findings suggest that members of WEIRD societies, including young children, are among the least representative populations one could find for generalizing about humans. Many of these findings involve domains that are associated with fundamental aspects of psychology, motivation, and behavior - hence, there are no obvious a priori grounds for claiming that a particular behavioral phenomenon is universal based on sampling from a single subpopulation. Overall, these empirical patterns suggests that we need to be less cavalier in addressing questions of human nature on the basis of data drawn from this particularly thin, and rather unusual, slice of humanity. We close by proposing ways to structurally re-organize the behavioral sciences to best tackle these challenges.
6,370 citations
Cites background from "Choices, Values, and Frames"
...Psychology has long been fascinated with how people assert agency by making choices (Bandura 1982; Kahneman & Tversky 2000; Schwartz 2004), and has explored the efforts that people go through to ensure that their actions feel freely chosen and that their choices are sensible....
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TL;DR: The author gives 4 reasons for considering the hypothesis that moral reasoning does not cause moral judgment; rather, moral reasoning is usually a post hoc construction, generated after a judgment has been reached.
Abstract: Research on moral judgment has been dominated by rationalist models, in which moral judgment is thought to be caused by moral reasoning. The author gives 4 reasons for considering the hypothesis that moral reasoning does not cause moral judgment; rather, moral reasoning is usually a post hoc construction, generated after a judgment has been reached. The social intuitionist model is presented as an alternative to rationalist models. The model is a social model in that it deemphasizes the private reasoning done by individuals and emphasizes instead the importance of social and cultural influences. The model is an intuitionist model in that it states that moral judgment is generally the result of quick, automatic evaluations (intuitions). The model is more consistent than rationalist models with recent findings in social, cultural, evolutionary, and biological psychology, as well as in anthropology and primatology.
6,080 citations
01 Jan 2007
TL;DR: This paper found that bad is stronger than good, as a general principle across a broad range of psychological phenomena, such as bad emotions, bad parents, bad feedback, and bad information is processed more thoroughly than good.
Abstract: The greater power of bad events over good ones is found in everyday events, major life events (e.g., trauma), close relationship outcomes, social network patterns, interpersonal interactions, and learning processes. Bad emotions, bad parents, and bad feedback have more impact than good ones, and bad information is processed more thoroughly than good. The self is more motivated to avoid bad self-definitions than to pursue good ones. Bad impressions and bad stereotypes are quicker to form and more resistant to disconfirmation than good ones. Various explanations such as diagnosticity and salience help explain some findings, but the greater power of bad events is still found when such variables are controlled. Hardly any exceptions (indicating greater power of good) can be found. Taken together, these findings suggest that bad is stronger than good, as a general principle across a broad range of psychological phenomena.
4,933 citations
References
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TL;DR: 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.
Abstract: 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.
15,513 citations
"Choices, Values, and Frames" refers background in this paper
...It has also been observed with nonmonetary outcomes, such as hours of pain (Eraker & Sox, 1981) and loss of human lives (Fischhoff, 1983; Tversky, 1977; Tversky & Kahneman, 1981)....
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...The same option, however, can be framed or described in different ways (Tversky & Kahneman, 1981)....
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Book•
01 Jan 19547,545 citations
"Choices, Values, and Frames" refers background in this paper
...The following problem, based on examples of Savage (1954) and Thaler (1980), introduces some of the rules that govern the construction of mental accounts and illustrates the extension of the concavity of value to the acceptability of trans- actions....
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TL;DR: In this article, the authors show that the maximization of individual wealth is not an ordinary problem in variational calculus, because the individual does not control, and may even be ignorant of, some of the variables.
Abstract: THIS book is based on the theory that the economic man attempts to maximize his share of the world's goods and services in the same way that a participant in a game involving many players attempts to maximize his winnings. The authors point out that the maximization of individual wealth is not an ordinary problem in variational calculus, because the individual does not control, and may even be ignorant of, some of the variables. The general theory of social games, in their view, offers a simplified conceptual model of economic behaviour, and a study of that theory can do much to throw light on certain basic concepts of economics, for example, that of utility. Theory of Games and Economic Behavior By John Von Neumann Oskar Morgenstern. Pp. xviii + 625. (Princetown, N.J.: Princetown University Press; London: Sir Humphrey Milford, Oxford University Press, 1944.) 66s. 6d.
5,824 citations
"Choices, Values, and Frames" refers background in this paper
...Modern decision theory can be said to begin with the pioneering work of von Neumann and Morgenstern (1947), who laid down several qualitative principles, or axioms, that should govern the preferences of a rational decision maker....
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TL;DR: The economic theory of the consumer is a combination of positive and normative theories as discussed by the authors, which describes how consumers should choose, but it is also described how they do choose, and in certain well-defined situations many consumers act in a manner that is inconsistent with economic theory.
Abstract: The economic theory of the consumer is a combination of positive and normative theories. Since it is based on a rational maximizing model it describes how consumers should choose, but it is alleged to also describe how they do choose. This paper argues that in certain well-defined situations many consumers act in a manner that is inconsistent with economic theory. In these situations economic theory will make systematic errors in predicting behavior. Kanneman and Tversey's prospect theory is proposed as the basis for an alternative descriptive theory. Topics discussed are: undeweighting of opportunity costs, failure to ignore sunk costs, scarch behavior choosing not to choose and regret, and precommitment and self-control.
5,099 citations
"Choices, Values, and Frames" refers background in this paper
...For example, Thaler (1980) noted that lobbyists for the credit card industry insisted that any price difference between cash and credit purchases be labeled a cash discount rather than a credit card surcharge....
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...Thaler (1980) coined the term "endowment effect" to describe the reluctance of people to part from assets that belong to their endowment....
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...For example, Thaler (1980) noted that lobbyists for the credit card industry insisted that any price difference between cash and credit purchases be labeled a cash discount rather than a credit card surcharge....
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...The following problem, based on examples of Savage (1954) and Thaler (1980), introduces some of the rules that govern the construction of mental accounts and illustrates the extension of the concavity of value to the acceptability of trans- actions....
[...]
...The following problem, based on examples of Savage (1954) and Thaler (1980) , introduces some of the rules that govern the construction of mental accounts and illustrates the extension of the concavity of value to the acceptability of transactions....
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Posted Content•
TL;DR: In this theory, the consideration of cases which are all of the same probability is insisted upon as mentioned in this paper, and what remains to be done within the framework of this theory amounts to the enumeration of all alternatives, their breakdown into equi-probable cases and their insertion into corresponding classifications.
Abstract: EVER SINCE mathematicians first began to study the measurement of risk there has been general agreement on the following proposition: Expected values are computed by multiplying each possible gain by the number of ways in which it can occur, and then dividing the sum of these products by the total number of possible cases where, in this theory, the consideration of cases which are all of the same probability is insisted upon. If this rule be accepted, what remains to be done within the framework of this theory amounts to the enumeration of all alternatives, their breakdown into equi-probable cases and, finally, their insertion into corresponding classifications…
2,347 citations