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Psychophysics of the Probability Weighting Function [PDF]
SSRN Electronic Journal, 2011 A probability weighting function w(p) for an objective probability p in decision under risk plays a pivotal role in Kahneman-Tversky's prospect theory. Although recent studies in econophysics and neuroeconomics widely utilized probability weighting functions, psychophysical foundations of the probability weighting functions have been unknown.
Takahashi, Taiki, Taiki Takahashi
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Curvature of the Probability Weighting Function [PDF]
Management Science, 1996 When individuals choose among risky alternatives, the psychological weight attached to an outcome may not correspond to the probability of that outcome. In rank-dependent utility theories, including prospect theory, the probability weighting function permits probabilities to be weighted nonlinearly. Previous empirical studies of the weighting function
George Wu, Richard Gonzalez
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Insurance and Probability Weighting Functions [PDF]
SSRN Electronic Journal, 2006 Evidence shows that (i) people overweight low probabilities and underweight high probabilities, but (ii) ignore events of extremely low probability and treat extremely high probability events as certain. Decision models, such as rank dependent utility (RDU) and cumulative prospect theory (CP), use probability weighting functions.
Ali al-Nowaihi, Sanjit Dhami
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A Note on the Shape of the Probability Weighting Function [PDF]
, 2018 The focus of this contribution is on the transformation of objective probability, which in Prospect Theory is commonly referred as probability weighting. Empirical evidence suggests a typical inverse-S shaped function: decision makers tend to overweight small probabilities, and underweight medium and high probabilities; moreover, the probability ...
Martina Nardon, Paolo Pianca
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A Testing Method of Probability Weighting Functions From an Axiomatic Perspective [PDF]
Frontiers in Applied Mathematics and Statistics, 2018 This study presents a testing approach to examine various models of probability weighting functions that are considered nonlinear functions of probability in behavioral decision theory, such as prospect theory.
Kazuhisa Takemura +2 more
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What Determines the Shape of the Probability Weighting Function Under Uncertainty?
Management Science, 2001 Decision weights are an important component in recent theories of decision making under uncertainty. To better explain these decision weights, a two-stage approach has been proposed: First, the probability of an event is judged and then this probability is transformed by the probability weighting function known from decision making under risk.
Kilka, Michael, Weber, Martin
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Probability Weighting Functions [PDF]
SSRN Electronic Journal, 2015 Cumulative prospect theory (CPT) has been proposed as an alternative to expected utility theory to explain irregular behavior by economic agents. CPT comprises two key transformations: one of outcome values and the other of objective probabilities. Risk attitudes are derived from the shapes of these transformations as well as their interaction.
Martina Nardon, Paolo Pianca
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What Determines the Shape of the Probability Weighting Function? [PDF]
SSRN Electronic Journal, 2006 Economics Working Paper Series, 06 ...
Helga Fehr-Duda +2 more
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A simple derivation of Prelec's probability weighting function [PDF]
Journal of Mathematical Psychology, 2006 zbMATH Open Web Interface contents unavailable due to conflicting licenses.
Al-Nowaihi, Ali, Dhami, Sanjit
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On a derivation of the Goldstein–Einhorn probability weighting functions [PDF]
Aequationes mathematicae, 2020 AbstractThe well known Goldstein–Einhorn probability weighting functions have been characterized by Gonzalez and Wu using the linear in log odds preference condition. We provide an alternative way of deriving this class of functions. It is based on the concept of indifference prices.
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