Problems of utility and prospect theories. A “certain–uncertain” inconsistency within their experimental methods

Harin, Alexander (2015): Problems of utility and prospect theories. A “certain–uncertain” inconsistency within their experimental methods.

Abstract

In random–lottery incentive experiments, the choices of certain outcomes are stimulated by uncertain lotteries. This “certain–uncertain” inconsistency is evident, but only recently emphasized. Because of it, conclusions from a random–lottery incentive experiment that includes a certain outcome cannot be unquestionably correct. Well-known experimental results and purely mathematical theorems support this. The main result presented here is: The usual experimental systems of utility and prospect theories may need additional independent analyses in the context of the “certain–uncertain” inconsistency.

• Item Type: MPRA Paper
• Language: English
• Keywords: utility; prospect theory; experiment; incentive; random-lottery incentive system; Prelec; probability weighting function
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General; C - Mathematical and Quantitative Methods > C9 - Design of Experiments; C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C90 - General; C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C91 - Laboratory, Individual Behavior; C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C93 - Field Experiments; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty

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