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The decision paradoxes motivating Prospect Theory: The prevalence of the paradoxes increases with numerical ability
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Psychology.
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Psychology.
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Psychology.
2019 (English)In: Judgment and decision making, ISSN 1930-2975, E-ISSN 1930-2975, Vol. 14, no 4, p. 513-533Article in journal (Refereed) Published
Abstract [en]

Prospect Theory (PT: Kahneman & Tversky, 1979) of risky decision making is based on psychological phenomena (paradoxes) that motivate assumptions about how people react to gains and losses, and how they weight outcomes with probabilities. Recent studies suggest that people's numeracy affect their decision making. We therefore conducted a large-scale conceptual replication of the seminal study by Kahneman and Tversky (1979), where we targeted participants with larger variability in numeracy. Because people low in numeracy may be more dependent on anchors in the form of other judgments we also manipulated design type (within-subject design, vs. single-stimuli design, where participants assess only one problem). The results from about 1,800 participants showed that design type had no effect on the modal choices. The rate of replication of the paradoxes in Kahneman and Tversky was poor and positively related to the participants' numeracy. The Probabilistic Insurance Effect was observed at all levels of numeracy. The Reflection Effects were not fully replicated at any numeracy level. The Certainty and Isolation Effects explained by nonlinear probability weighting were replicated only at high numeracy. No participant exhibited all 9 paradoxes and more than 50% of the participants exhibited at most three of the 9 paradoxes. The choices by the participants with low numeracy were consistent with a shift towards a cautionary non-compensatory strategy of minimizing the risk of receiving the worst possible outcome. We discuss the implications for the psychological assumptions of PT.

Place, publisher, year, edition, pages
SOC JUDGMENT & DECISION MAKING , 2019. Vol. 14, no 4, p. 513-533
Keywords [en]
prospect theory, replication, numeracy, experimental design
National Category
Psychology (excluding Applied Psychology)
Identifiers
URN: urn:nbn:se:uu:diva-392873ISI: 000477796000009Libris ID: Fri fulltextOAI: oai:DiVA.org:uu-392873DiVA, id: diva2:1354737
Available from: 2019-09-26 Created: 2019-09-26 Last updated: 2019-09-26Bibliographically approved

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