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Replicating patterns of prospect theory for decision under risk

Author

Listed:
  • Kai Ruggeri

    (Columbia University
    University of Cambridge)

  • Sonia Alí

    (University of Sussex)

  • Mari Louise Berge

    (Eötvös Loránd University)

  • Giulia Bertoldo

    (University of Padova)

  • Ludvig D. Bjørndal

    (University of Oslo)

  • Anna Cortijos-Bernabeu

    (University of Barcelona)

  • Clair Davison

    (University of St Andrews)

  • Emir Demić

    (University of Belgrade)

  • Celia Esteban-Serna

    (University College London)

  • Maja Friedemann

    (University of Oxford)

  • Shannon P. Gibson

    (Oxford Brookes University)

  • Hannes Jarke

    (University of Cambridge)

  • Ralitsa Karakasheva

    (University of Nottingham)

  • Peggah R. Khorrami

    (Columbia University)

  • Jakob Kveder

    (University of Ljubljana)

  • Thomas Lind Andersen

    (Svendborg Municipality)

  • Ingvild S. Lofthus

    (University of Oslo)

  • Lucy McGill

    (Trinity College)

  • Ana E. Nieto

    (University Francisco de Vitoria)

  • Jacobo Pérez

    (University Francisco de Vitoria)

  • Sahana K. Quail

    (University of Oxford)

  • Charlotte Rutherford

    (University of Cambridge)

  • Felice L. Tavera

    (University of Cologne)

  • Nastja Tomat

    (University of Ljubljana)

  • Chiara Van Reyn

    (KU Leuven)

  • Bojana Većkalov

    (University of Belgrade
    University of Amsterdam)

  • Keying Wang

    (University College London)

  • Aleksandra Yosifova

    (New Bulgarian University)

  • Francesca Papa

    (Organisation for Economic Cooperation and Development)

  • Enrico Rubaltelli

    (University of Padova)

  • Sander van der Linden

    (University of Cambridge)

  • Tomas Folke

    (Columbia University
    University of Cambridge)

Abstract

Prospect theory is among the most influential frameworks in behavioural science, specifically in research on decision-making under risk. Kahneman and Tversky’s 1979 study tested financial choices under risk, concluding that such judgements deviate significantly from the assumptions of expected utility theory, which had remarkable impacts on science, policy and industry. Though substantial evidence supports prospect theory, many presumed canonical theories have drawn scrutiny for recent replication failures. In response, we directly test the original methods in a multinational study (n = 4,098 participants, 19 countries, 13 languages), adjusting only for current and local currencies while requiring all participants to respond to all items. The results replicated for 94% of items, with some attenuation. Twelve of 13 theoretical contrasts replicated, with 100% replication in some countries. Heterogeneity between countries and intra-individual variation highlight meaningful avenues for future theorizing and applications. We conclude that the empirical foundations for prospect theory replicate beyond any reasonable thresholds.

Suggested Citation

  • Kai Ruggeri & Sonia Alí & Mari Louise Berge & Giulia Bertoldo & Ludvig D. Bjørndal & Anna Cortijos-Bernabeu & Clair Davison & Emir Demić & Celia Esteban-Serna & Maja Friedemann & Shannon P. Gibson & H, 2020. "Replicating patterns of prospect theory for decision under risk," Nature Human Behaviour, Nature, vol. 4(6), pages 622-633, June.
    • Handle: RePEc:nat:nathum:v:4:y:2020:i:6:d:10.1038_s41562-020-0886-x
    DOI: 10.1038/s41562-020-0886-x
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    Cited by:

    1. Daniel Reck & Arthur Seibold, 2022. "The Welfare Economics of Reference Dependence," CESifo Working Paper Series 9999, CESifo.
    2. Eszter Czibor & Danny Hsu & David Jimenez-Gomez & Susanne Neckermann & Burcu Subasi, 2022. "Loss-Framed Incentives and Employee (Mis-)Behavior," Management Science, INFORMS, vol. 68(10), pages 7518-7537, October.
    3. Bao, Helen X.H. & Robinson, Guy M., 2022. "Behavioural land use policy studies: Past, present, and future," Land Use Policy, Elsevier, vol. 115(C).
    4. Brian Gill & others, "undated". "In COVID-19 Health Messaging, Loss Framing Increases Anxiety with Little-to-No Concomitant Benefits: Experimental Evidence from 84 Countries," Mathematica Policy Research Reports ac30d0619fd64793b2e1b108d, Mathematica Policy Research.
    5. Evgeny Kagan & Alexander Rybalov, 2022. "Subjective Trusts and Prospects: Some Practical Remarks on Decision Making with Imperfect Information," SN Operations Research Forum, Springer, vol. 3(1), pages 1-24, March.
    6. Kai Ruggeri & Bojana Većkalov & Lana Bojanić & Thomas L. Andersen & Sarah Ashcroft-Jones & Nélida Ayacaxli & Paula Barea-Arroyo & Mari Louise Berge & Ludvig D. Bjørndal & Aslı Bursalıoğlu & Vanessa Bü, 2021. "The general fault in our fault lines," Nature Human Behaviour, Nature, vol. 5(10), pages 1369-1380, October.
    7. Vincent X. Wang & Xi Chen & Lily Lim & Chu-Ren Huang, 2023. "Framing Covid-19 reporting in the Macau Daily News using metaphors and gain/loss prospects: a war for collective gains," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-10, December.
    8. Dorison, Charles A & Lerner, Jennifer S & Heller, Blake H & Rothman, Alexander J & Kawachi, Ichiro I & Wang, Ke & Rees, Vaughan W & Gill, Brian P & Gibbs, Nancy & Ebersole, Charles R & Vally, Zahir & , 2022. "In COVID-19 health messaging, loss framing increases anxiety with little-to-no concomitant benefits : Experimental evidence from 84 countries," Other publications TiSEM 235f67b6-6be5-4061-8693-3, Tilburg University, School of Economics and Management.
    9. Kai Ruggeri & Amma Panin & Milica Vdovic & Bojana Većkalov & Nazeer Abdul-Salaam & Jascha Achterberg & Carla Akil & Jolly Amatya & Kanchan Amatya & Thomas Lind Andersen & Sibele D. Aquino & Arjoon Aru, 2022. "The globalizability of temporal discounting," Nature Human Behaviour, Nature, vol. 6(10), pages 1386-1397, October.
      • Kai Ruggeri & Amma Panin & Milica Vdovic & Bojana Većkalov & Nazeer Abdul-Salaam & Jascha Achterberg & Carla Akil & Jolly Amatya & Kanchan Amatya & Thomas Lind Andersen & Sibele D Aquino & Arjoon Arun, 2022. "The globalizability of temporal discounting," Post-Print halshs-03903193, HAL.
    10. Kevin da Silva Castanheira & Madeleine Sharp & A Ross Otto, 2021. "The impact of pandemic-related worry on cognitive functioning and risk-taking," PLOS ONE, Public Library of Science, vol. 16(11), pages 1-19, November.
    11. Elbæk, Christian T. & Lystbæk, Martin Nørhede & Mitkidis, Panagiotis, 2022. "On the psychology of bonuses: The effects of loss aversion and Yerkes-Dodson law on performance in cognitively and mechanically demanding tasks," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 98(C).
    12. Chen, Rongxin & Lepori, Gabriele M. & Tai, Chung-Ching & Sung, Ming-Chien, 2022. "Explaining cryptocurrency returns: A prospect theory perspective," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 79(C).
    13. Kai Ruggeri & Amma Panin & Milica Vdovic & Bojana Većkalov & Nazeer Abdul-Salaam & Jascha Achterberg & Carla Akil & Jolly Amatya & Kanchan Amatya & Thomas Lind Andersen & Sibele D. Aquino & Arjoon Aru, 2022. "The globalizability of temporal discounting," Nature Human Behaviour, Nature, vol. 6(10), pages 1386-1397, October.
    14. Bernheim, B. Douglas & Sprenger, Charles, 2023. "On the empirical validity of cumulative prospect theory: A response to the Wakker commentaries," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 107(C).
    15. Wakker, Peter P., 2023. "A criticism of Bernheim & Sprenger's (2020) tests of rank dependence," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 107(C).
    16. Aldona Kluczek & Patrycja Żegleń & Daniela Matušíková, 2021. "The Use of Prospect Theory for Energy Sustainable Industry 4.0," Energies, MDPI, vol. 14(22), pages 1-29, November.
    17. Yang, Luhe & Zhang, Lianzhong & Yang, Duoxing, 2022. "Asymmetric micro-dynamics in spatial anonymous public goods game," Applied Mathematics and Computation, Elsevier, vol. 415(C).
    18. Jens Rommel & Julian Sagebiel & Marieke Cornelia Baaken & Jesús Barreiro‐Hurlé & Douadia Bougherara & Luigi Cembalo & Marija Cerjak & Tajana Čop & Mikołaj Czajkowski & María Espinosa‐Goded & Julia Höh, 2023. "Farmers' risk preferences in 11 European farming systems: A multi‐country replication of Bocquého et al. ()," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 45(3), pages 1374-1399, September.
    19. Cuc Lavinia Denisia & Rad Dana & Hațegan Camelia Daniela & Trifan Vanina Adoriana & Ardeleanu Titus, 2024. "The Mediating Role of the Financial Recommender System Advising Acceptance in the Relationship between Investments Trust and Decision-Making Behavior," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 18(1), pages 2260-2273.
    20. Simone Ferrari-Toniolo & Leo Chi U. Seak & Wolfram Schultz, 2022. "Risky choice: Probability weighting explains independence axiom violations in monkeys," Journal of Risk and Uncertainty, Springer, vol. 65(3), pages 319-351, December.
    21. James D. Fielder, 2022. "Ghosts of the Titanomachy: Structure, Commitment, Economics, and Risk as Causal Mechanisms in an Online Battle," Simulation & Gaming, , vol. 53(3), pages 265-284, June.
    22. You-Ping Yang & Xinjian Li & Veit Stuphorn, 2022. "Primate anterior insular cortex represents economic decision variables proposed by prospect theory," Nature Communications, Nature, vol. 13(1), pages 1-14, December.
    23. A. I. Tavares, 2024. "Preventable mortality, related socioeconomic, and cultural factors across European countries," SN Business & Economics, Springer, vol. 4(8), pages 1-18, August.
    24. Babbitt, Laura G. & Brown, Drusilla & Antolin, Ana & Toosi, Negin R., 2023. "Improving migration experiences for workers: Recruitment practices along the Bangladesh–Qatar corridor," World Development Perspectives, Elsevier, vol. 30(C).

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