Prospect theory in the wild: how good is the nonexperimental evidence for prospect theory?

ABSTRACT

Prospect theory is widely thought to be one of the best-confirmed accounts of human decision-making under risk. There are numerous claims in the literature that various kinds of nonexperimental, observational evidence provide strong support for prospect theory. We investigate the veracity of these claims using a set of philosophy of science morals and a careful delineation of models of choice under risk, focussing on the extant versions of prospect theory and their various components. We challenge the claim that prospect theory is well supported because it explains the equity premium puzzle. In addition, we analyse a major international survey thought to support prospect theory and argue that the support is questionable, both for statistical reasons and because the evidence itself is mixed. Our analyses highlight some important ideas in the philosophy of science and caution against strong claims about support for prospect theory that rely on nonexperimental, observational evidence.     

Modeling ethics: The impact of management actions on restaurant workers’ ethical optimism

Unethical behavior is a significant problem for all members of society. One of the ways workers learn acceptable ethical behavior is by observing successful members of the organization. This paper examines the actions of management and the subsequent affect on the ethical optimism of workers in the restaurant industry. Ethical optimism refers to the belief that if an individual behaves ethically they will enjoy success within the organization. Beyond extending the work on ethical optimism this study produced several results of particular interest. Significant differences were identified between ethnic groups, men and women, and length of employment of workers.     

Effects of compound messages on global characteristics of Galileo spaces

The present article investigates the effect of messages compounded of many assertions on the overall size of a Galileo space. A Galileo space is a space within which objects and attributes are arrayed in such a way that the differences in meaning between any two objects in the space is given by the distances between those objects. Thus attributes that seem to be similar are located close to each other, and objects which are seen to embody a given attribute are located close to that attributes. Similarly, objects thought to be similar to each other are located close to each other. Results show that, following approximately a ten hour latency period, the space shows a substantial increase in size, followed by a return to its original dimensions. There is some indication that the expansion of the space may be periodic, which gives rise to the possibility that human beliefs and attitudes may be modelled as a damped oscillating system. Should this be the case, human cognitive processes, such as attitude and belief changes, might be modelled by the equations for dampled oscillations.     

Subjective beliefs and economic preferences during the COVID-19 pandemic

Experimental Economics - The COVID-19 pandemic presents a remarkable opportunity to put to work all of the research that has been undertaken in past decades on the elicitation and structural...