During the last 25 years, prospect theory and its successor, cumulative prospect theory, replaced expected utility as the dominant descriptive theories of risky decision making. Although these models account for the original Allais paradoxes, 11 new paradoxes show where prospect theories lead to self-contradiction or systematic false predictions.…

Empirical research has shown that when making choices based on probabilistic options, people behave as if they overestimate small probabilities, underestimate large probabilities, and treat positive and negative outcomes differently. These distortions have been modeled using a nonlinear probability weighting function, which is found in several…

Comments on the article by E. Brandstatter, G. Gigerenzer, and R. Hertwig (2006). The authors discuss the priority heuristic, a recent model for decisions under risk. They reanalyze the experimental validity of this approach and discuss how these results compare with cumulative prospect theory, the currently most established model in behavioral…

E. Brandstatter, G. Gigerenzer, and R. Hertwig (2006) contended that their priority heuristic, a type of lexicographic semiorder model, is more accurate than cumulative prospect theory (CPT) or transfer of attention exchange (TAX) models in describing risky decisions. However, there are 4 problems with their argument. First, their heuristic is not…

Bernoulli's framework of expected utility serves as a model for various psychological processes, including motivation, moral sense, attitudes, and decision making. To account for evidence at variance with expected utility, the authors generalize the framework of fast and frugal heuristics from inferences to preferences. The priority heuristic…

Prospect theory assumes nonadditive decision weights for preferences over risky gambles. Such decision weights generalize additive probabilities. This article proposes a decomposition of decision weights into a component reflecting risk attitude and a new component depending on belief. The decomposition is based on an observable preference…

Author summarizes assumptions underlying research into human processing of probabilistic information used in decision-making. He outlines a model for further studies, noting that why subjects may reject it is as important as whether they do so. Theoretical prospects are discussed also. (Author/PD)