Hierarchical Maximum Likelihood Parameter Estimation for Cumulative Prospect Theory: Improving the Reliability of Individual Risk Parameter Estimates
Published Online:6 Jan 2017https://doi.org/10.1287/mnsc.2016.2591
References
- (2000) Parameter-free elicitation of utility and probability weighting functions. Management Sci. 46(11):1497–1512.Link, Google Scholar
- (2013) Thirty years of prospect theory in economics: A review and assessment. J. Econom. Perspect. 27(1):173–195.Crossref, Google Scholar
- (1999) The paradoxes of Allais, stochastic dominance, and decision weights. Shanteau J, Mellers BA, Schum DA, eds. Decision Science and Technology (Springer, New York), 27–52.Crossref, Google Scholar
- (1997) Tests of theories of decision making: Violations of branch independence and distribution independence. Organ. Behav. Human Decision Processes 71(2):161–194.Crossref, Google Scholar
- (2010) Risk and rationality: Uncovering heterogeneity in probability distortion. Econometrica 78(4):1375–1412.Crossref, Google Scholar
- (1995) Individual decision making. Kagel JH, Roth AE, eds. The Handbook of Experimental Economics (Princeton University Press, Princeton, NJ), 587–703.Google Scholar
- (2004) Prospect theory in the wild: Evidence from the field. Camerer CF, Loewenstein G, Rabin M, eds. Advances in Behavioral Economics (Princeton University Press, Princeton, NJ), 148–161.Crossref, Google Scholar
- (1994) Violations of the betweenness axiom and nonlinearity in probability. J. Risk Uncertainty 8(2):167–196.Crossref, Google Scholar
- (2013) Optimal decision stimuli for risky choice experiments: An adaptive approach. Management Sci. 59(2):358–375.Link, Google Scholar
- (2011) Mixture models of choice under risk. J. Econometrics 162(1):79–88.Crossref, Google Scholar
- (1954) The theory of decision making. Psych. Bull. 51(4):380–417.Crossref, Google Scholar
- (2009) Individual differences in risk preference predict neural responses during financial decision-making. Brain Res. 1290:28–51.Crossref, Google Scholar
- (2008) Bayesian and maximum likelihood estimation of hierarchical response times. Psychonomic Bull. Rev. 15(6):1209–1217.Crossref, Google Scholar
- (2012) Probability and risk: Foundations and economic implications of probability-dependent risk preferences. Ann. Rev. Econom. 4(1):567–593.Crossref, Google Scholar
- (2010) Using skin conductance in judgment and decision making research. Schulte-Mecklenbeck M, Kuehberger A, Ranyard R, eds. A Handbook of Process Tracing Methods for Decision Research: A Critical Review and User’s Guide (Psychology Press, New York), 163–184.Google Scholar
- (2015) Decision under risk: From the field to the laboratory and back. The Wiley Blackwell Handbook of Judgment and Decision Making (John Wiley & Sons, Chichester, West Sussex, UK), 43–88.Crossref, Google Scholar
- (2007) Individual-level loss aversion in risky and riskless choice. IZA Discussion Paper 2961, Institute for the Study of Labor, Bonn, Germany.Google Scholar
- (2012) Cognitive models of risky choice: Parameter stability and predictive accuracy of prospect theory. Cognition 123(1):21–32.Crossref, Google Scholar
- (1987) Expression theory and the preference reversal phenomena. Psych. Rev. 94(2):236–254.Crossref, Google Scholar
- (1999) On the shape of the probability weighting function. Cognitive Psych. 38(1):129–166.Crossref, Google Scholar
- (1994) The predictive utility of generalized expected utility theories. Econometrica 62(6):1251–1289.Crossref, Google Scholar
- (2008) Risk aversion in the laboratory. Cox J, Harrison G, eds. Risk Aversion in Experiments, Research in Experimental Economics, Vol. 12 (Emerald Group Publishing Limited, Bingley, UK), 41–196.Crossref, Google Scholar
- (2009) Expected utility theory and prospect theory: One wedding and a decent funeral. Experiment. Econom. 12(2):133–158.Crossref, Google Scholar
- (1994) Investigating generalizations of the expected utility theory using experimental data. Econometrica 62(6):1291–1326.Crossref, Google Scholar
- (2002) Risk aversion and incentive effects. Amer. Econom. Rev. 92(5):1644–1655.Crossref, Google Scholar
- (2006) Neural signatures of economic preferences for risk and ambiguity. Neuron 49(5):765–775.Crossref, Google Scholar
- (2008) Non-monotonicity of the Tversky-Kahneman probability-weighting function: A cautionary note. Eur. Financial Management 14(3):385–390.Crossref, Google Scholar
- (1979) Prospect theory: An analysis of decision under risk. Econometrica 47(2):263–291.Crossref, Google Scholar
- (2000) Choices, values and frames. Kahneman D, Tversky A, eds. Choices, Values and Frames (Cambridge University Press, Cambridge, UK), 1–16.Crossref, Google Scholar
- (1979) Subjectively weighted utility and the Allais paradox. Organ. Behav. Human Performance 24(1):67–72.Crossref, Google Scholar
- (1921) Risk, Uncertainty, and Profit (Houghton Mifflin Company, Chicago).Crossref, Google Scholar
- (2005) An index of loss aversion. J. Econom. Theory 122(1):119–131.Crossref, Google Scholar
- (2010) Computational Modeling in Cognition: Principles and Practice (Sage, Los Angeles).Google Scholar
- (1971) Reversals of preference between bids and choices in gambling decisions. J. Experiment. Psych. 89(1):46–55.Crossref, Google Scholar
- (2006) The Construction of Preference (Cambridge University Press, Cambridge, UK).Crossref, Google Scholar
- (1995) Incorporating a stochastic element into decision theories. Eur. Econom. Rev. 39(3):641–648.Crossref, Google Scholar
- (1983) Some thoughts on the psychological concept of risk. J. Experiment. Psych. Human Perception Performance 9(1):137–144.Crossref, Google Scholar
- (1959) Individual Choice Behavior: A Theoretical Analysis (John Wiley & Sons, New York).Google Scholar
- (1957) Games and Decisions: Introduction and Critical Survey (John Wiley & Sons, New York).Google Scholar
- (1965) Preference, utility, and subjective probability. Luce RD, Bush RR, Galante E, eds. Handbook of Mathematical Psychology (John Wiley & Sons, New York), 249–410.Google Scholar
- (1980) Econometric models for probabilistic choice among products. J. Bus. 53(3):S13–S29.Crossref, Google Scholar
- (1951) An experimental measurement of utility. J. Political Econom. 59(5):371–404.Crossref, Google Scholar
- (1965) A simplex method for function minimization. Comput. J. 7(4):308–313.Crossref, Google Scholar
- (2011) Hierarchical Bayesian parameter estimation for cumulative prospect theory. J. Math. Psych. 55(1):84–93.Crossref, Google Scholar
- (1995) Happiness, Pleasure, and Judgment: The Contextual Theory and Its Applications (Psychology Press, New York).Google Scholar
- (1992) Behavioral decision research: A constructive processing perspective. Ann. Rev. Psych. 43(1):87–131.Crossref, Google Scholar
- (2002) When a good fit can be bad. Trends in Cognitive Sci. 6(10):421–425.Crossref, Google Scholar
- (1998) The probability weighting function. Econometrica 66(3):497–527.Crossref, Google Scholar
- (2000) Risk aversion and expected-utility theory: A calibration theorem. Econometrica 68(5):1281–1292.Crossref, Google Scholar
- (2016) The construct-behavior gap in behavioral decision research: A challenge beyond replicability. Working paper, University of Illinois at Urbana–Champaign, Champaign.Google Scholar
- (2008) The probabilistic nature of preferential choice. J. Experiment. Psych. Learn. Memory Cognition 34(6):1446–1465.Crossref, Google Scholar
- (2000) How persuasive is a good fit? A comment on theory testing. Psych. Rev. 107(2):358–367.Crossref, Google Scholar
- (1938) A note on the pure theory of consumers’ behaviour. Economica 5(17):61–71.Crossref, Google Scholar
- (2013) Hierarchical Bayesian modeling: Does it improve parameter stability? Proc. 35th Annual Conf. Cognitive Sci. Soc., Berlin, 1277–1282.Google Scholar
- (2015) Using Bayesian hierarchical parameter estimation to assess the generalizability of cognitive models of choice. Psychonomic Bull. Rev. 22(2):391–407.Crossref, Google Scholar
- (2016) Prospect theory tracks selective allocation of attention. Working paper, Max Planck Institute, Berlin.Google Scholar
- (2000) Developments in non-expected utility theory: The hunt for a descriptive theory of choice under risk. J. Econom. Literature 38(2):332–382.Crossref, Google Scholar
- (1957) On the psychophysical law. Psych. Rev. 64(3):153–181.Crossref, Google Scholar
- (2006) Decision by sampling. Cognitive Psych. 53(1):1–26.Crossref, Google Scholar
- (2003) Prospect relativity: How choice options influence decision under risk. J. Experiment. Psych.: General 132(1):23–46.Crossref, Google Scholar
- (2006) Cumulative prospect theory’s functional menagerie. J. Risk Uncertainty 32(2):101–130.Crossref, Google Scholar
- (2010) Risk and time preferences: Linking experimental and household survey data from Vietnam. Amer. Econom. Rev. 100(1):557–571.Crossref, Google Scholar
- (2013) Dynamic experiments for estimating preferences: An adaptive method of eliciting time and risk parameters. Management Sci. 59(3):613–640.Link, Google Scholar
- (1992) Advances in prospect theory: Cumulative representations of uncertainty. J. Risk Uncertainty 5(4):297–323.Crossref, Google Scholar
- (2006) Revealed preference. Szenberg M, Ramrattan L, Gottesman AA, eds. Samuelsonian Economics and the Twenty-First Century (Oxford University Press, Oxford, UK), 99–115.Crossref, Google Scholar
- (2005) Formalizing reference dependence and initial wealth in Rabin’s calibration theorem. Working paper, Erasmus University, Rotterdam, Netherlands.Google Scholar
- (2010) Prospect Theory: For Risk and Ambiguity (Cambridge University Press, Cambridge, UK).Crossref, Google Scholar
- (2010) Bayesian parameter estimation in the expectancy valence model of the Iowa gambling task. J. Math. Psych. 54(1):14–27.Crossref, Google Scholar
- (2011) Visiting the decision factory: Observing cognition with MouselabWEB and other information acquisition methods. Schulte-Mecklenbeck M, Kühberger A, Ranyard R, eds. A Handbook of Process Tracing Methods for Decision Research: A Critical Review and User’s Guide (Taylor and Francis, New York), 21–42.Google Scholar
- (2014) Mouselab software. Last accessed November 17, 2016, http://www.mouselabweb.org.Google Scholar
- (2012) Measuring the time stability of prospect theory preferences. Theory Decision 72(3):359–386.Crossref, Google Scholar
- (2013) Bayesian probability and statistics in management research: A new horizon. J. Management 39(1):5–13.Google Scholar

