A hierarchical Bayesian framework for the classical patterns of risk preferences

Mateus Joffily () and Thijs van de Laar ()
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Mateus Joffily: GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - Université de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - UJM EPE - Université Jean Monnet (EPSCPE) - CNRS - Centre National de la Recherche Scientifique
Thijs van de Laar: TU/e - Eindhoven University of Technology [Eindhoven]

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Abstract: Decision-makers exhibit well-defined yet distinct preference patterns under risk: a fourfold pattern when evaluating risky prospects, and a twofold pattern when making choices involving those same prospects. They also display loss aversion by rejecting mixed prospects with equivalent gains and losses, and a framing effect by reversing preferences when equivalent prospects are framed as gains or losses. We show that these phenomena -the fourfold and twofold patterns, loss aversion, and framing effect -arise naturally from a single hierarchical Bayesian framework. Crucially, this framework relies solely on prior beliefs about outcome probabilities and motivated beliefs about outcomes, without requiring probability weighting or reference-dependent value functions.

Keywords: Fourfold Pattern; Probability Weighting; Bayesian Modeling (search for similar items in EconPapers)
Date: 2026-06-12
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