Browsing Harbaugh, Bill by Subject "Probability weighting"
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Harbaugh, William; Krause, Kate; Vesterlund, Lise (University of Oregon, Dept. of Economics, July 20, 2002)[more][less]Harbaugh, William Krause, Kate Vesterlund, Lise 20030813T19:35:06Z 20030813T19:35:06Z 20020720 http://hdl.handle.net/1794/84 The most distinctive prediction of prospect theory is the fourfold pattern (FFP) of risk attitudes. People are said to be (1) riskseeking over lowprobability gains, (2) riskaverse over lowprobability losses, (3) riskaverse over highprobability gains, and (4) riskseeking over highprobability losses. Using simple gambles over real payoffs, we conduct a direct test of this FFP prediction. We find that when pricing gambles subjects’ risk attitudes are consistent with the FFP. However, when they choose between the gamble and its expected value, their decisions are not distinguishable from random choice and are often the exact opposite of the prediction. These results hold both between and within subjects, and are robust even when we allow the subjects to simultaneously review and change their price and choice decisions. 0 bytes application/pdf en_US University of Oregon, Dept. of Economics University of Oregon Economics Department Working Papers; 20022 Probability weighting Expected utility Prospect theory Cumulative prospect theory Preference reversal Microeconomics Probabilities Decision making Game theory Economics, Mathematical Prospect Theory in Choice and Pricing Tasks Working Paper

Harbaugh, William; Krause, Kate; Vesterlund, Lise (November 5, 2001)[more][less]Harbaugh, William Krause, Kate Vesterlund, Lise 20050325T19:17:00Z 20050325T19:17:00Z 20011105 Experimental Economics 5(1): 5384. http://hdl.handle.net/1794/694 45 p. In this paper we examine how risk attitudes change with age. We present participants from age 5 to 64 with choices between simple gambles and the expected value of the gambles. The gambles are over both gains and losses, and vary in the probability of the nonzero payoff. Surprisingly, we find that many participants are risk seeking when faced with highprobability prospects over gains and risk averse when faced with smallprobability prospects. Over losses we find the exact opposite. Children’s choices are consistent with the underweighting of lowprobability events and the overweighting of highprobability ones. This tendency diminishes with age, and on average adults appear to use the objective probability when evaluating risky prospects. This research was funded by grants from the National Science Foundation and the Preferences Network of the MacArthur Foundation. 307657 bytes application/pdf en_US Probability weighting Subjective expected utility Prospect theory Children Risk Risk Attitudes of Children and Adults : Choices over Small and Large Probability Gains and Losses Article
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