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Prospect theory in the wild: Evidence from the field

Camerer, Colin F. (1998) Prospect theory in the wild: Evidence from the field. Social Science Working Paper, 1037. California Institute of Technology , Pasadena, CA. (Unpublished)

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The workhorses of economic analysis are simple formal models that can explain naturally occurring phenomena. Reflecting this taste, economists often say they will incorporate more psychological ideas into economics if those ideas can parsimoniously account for field data better than standard theories do. Taking this statement seriously, this article describes 10 regularities in naturally occurring data that are anomalies for expected utility theory but can all be explained by three simple elements of prospect theory: loss aversion, reflection effects, and nonlinear weighting of probability; moreover, the assumption is made that people isolate decisions (or edit them) from others they might be grouped with (Read, Loewenstein, and Rabin 1999; cf. Thaler, 1999). I hope to show how much success has already been had applying prospect theory to field data and to inspire economists and psychologists to spend more time in the wild.

Item Type:Report or Paper (Working Paper)
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Camerer, Colin F.0000-0003-4049-1871
Additional Information:This paper was prepared for D. Kahneman and A. Tversky (Eds.), Choices, Values and Frames (in press). The research was supported by NSF grant SBR-9601236 and the hospitality of the Center for Advanced Study in Behavioral Sciences during 1997-98. Linda Babcock and Barbara Mellers gave helpful suggestions. Published as Camerer, Colin F. (2001) Prospect Theory In The Wild: Evidence From The Field. In: Choices, Values, and Frames. Contemporary Psychology. No.47. American Psychological Association , Washington, DC, pp. 288-300.
Group:Social Science Working Papers
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Series Name:Social Science Working Paper
Issue or Number:1037
Record Number:CaltechAUTHORS:20170811-150835361
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:80314
Deposited By: Jacquelyn Bussone
Deposited On:11 Aug 2017 23:44
Last Modified:03 Oct 2019 18:29

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