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Problems of utility and prospect theories. A “certain–uncertain” inconsistency within their experimental methods

Alexander Harin

MPRA Paper from University Library of Munich, Germany

Abstract: In random–lottery incentive experiments, the choices of certain outcomes are stimulated by uncertain lotteries. This “certain–uncertain” inconsistency is evident, but only recently emphasized. Because of it, conclusions from a random–lottery incentive experiment that includes a certain outcome cannot be unquestionably correct. Well-known experimental results and purely mathematical theorems support this. The main result presented here is: The usual experimental systems of utility and prospect theories may need additional independent analyses in the context of the “certain–uncertain” inconsistency.

Keywords: utility; prospect theory; experiment; incentive; random-lottery incentive system; Prelec; probability weighting function (search for similar items in EconPapers)
JEL-codes: C1 C9 C90 C91 C93 D8 D81 (search for similar items in EconPapers)
Date: 2015-11-16
New Economics Papers: this item is included in nep-dcm, nep-exp, nep-hpe and nep-upt
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