On the empirical validity of cumulative prospect theory: A response to the Wakker commentaries

B. Douglas Bernheim and Charles Sprenger

Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), 2023, vol. 107, issue C

Abstract: In Bernheim and Sprenger (2020) and Bernheim, Royer, and Sprenger (2022), we devised and implemented a new test of rank-dependent probability weighting for Cumulative Prospect Theory (CPT). This paper responds to critical commentary by Wakker (2023), which recapitulates both Abdellaoui, Li, Wakker, and Wu (2020) and Wakker (2022a). We demonstrate that the Wakker commentaries proceed from fundamental misconceptions concerning the structure of our tests, rely on unsubstantiated assertions that are falsified by evidence and robustness analyses they ignore, misrepresent our positions, and involve a host of other conceptual and methodological errors. In short, the critique lacks scientific merit.

Keywords: Prospect Theory; probability weighting; risk (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:soceco:v:107:y:2023:i:c:s2214804323001465

DOI: 10.1016/j.socec.2023.102120

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