Choices, Values, and Frames

This book presents the definitive exposition of prospect theory, a compelling alternative to the classical utility theory of choice. Building on the 1982 volume, Judgement Under Uncertainty, this book brings together seminal papers on prospect theory from economists, decision theorists, and psychologists, including the work of the late Amos Tversky, whose contributions are collected here for the first time. While remaining within a rational choice framework, prospect theory delivers more accurate, empirically verified predictions in key test cases, as well as helping to explain many complex, real-world puzzles. In this volume, it is brought to bear on phenomena as diverse as the principles of legal compensation, the equity premium puzzle in financial markets, and the number of hours that New York cab drivers choose to drive on rainy days. Theoretically elegant and empirically robust, this volume shows how prospect theory has matured into a new science of decision making. Contents
1. Choices, values, and frames
Part I. Prospect Theory and Extensions: 2. Prospect theory: an analysis of decision under risk
3. Advances in prospect theory: cumulative representation of uncertainty
Part II. The Certainty Effect and the Weighting Function: 4. Compound invariant weighting function in prospect theory
5. Weighing risk and uncertainty
6. A belief-based account of decision under uncertainty
Part III. Loss Aversion and the Value Function: 7. Loss aversion in riskless choice: a reference-dependent model
8. Anomalies: the endowment effect, loss aversion, and status quo bias
9. The endowment effect and evidence of nonreversible indifference curves
10. A test of the theory of reference-dependent preferences
Part IV. Framing and Mental Accounting: 11. Rational choice and the framing of decisions
12. Framing, probability distortions, and insurance decisions
13. Mental accounting matters
Part V. Applications: 14. Toward a positive theory of consumer choice
15. Prospect theory in the wild: evidence from the field
16. Myopic loss aversion and the equity premium puzzle
17. Fairness as a constraint on profit seeking: entitlements in the market
18. Money illusion
19. Labor supply of New York City cab drivers: one day at a time
20. Are investors reluctant to realize their losses?
21. Timid choices and bold forecasts: a cognitive perspective on risk taking
22. Overconfidence and excess entry: an experimental approach
23. Judicial choice and disparities between measures of economic values
24. Contrasting rational and psychological analyses of political choice
25. Conflict resolution: a cognitive perspective
Part VI. The Multiplicity of Value: Reversals of Preference: 26. The construction of preference
27. Contingent weighting in judgment and choice
28. Context-dependent preferences
29. Ambiguity aversion and comparative ignorance
30. The evaluability hypothesis: explaining joint-separate preference reversals and beyond
Part VII. Choice over Time: 31. Preferences for sequences of outcomes
32. Anomalies in intertemporal choice: evidence and an interpretation
Part VIII. Alternative Conceptions of Value: 33. Reason-based choice
34. Value elicitation: is there anything in there?
35. Economists have preferences, psychologists have attitudes: an analysis of dollar responses to public issues
Part IX. Experienced Utility: 36. Endowments and contrast in judgments of well-being
37. A bias in the prediction of tastes
38. The effect of purchase quantity and timing on variety-seeking behavior
39. Back to Bentham? Explorations of expereiences utility
40. New challenges to the rationality assumption.

Author/Editor Details
Edited by: Daniel Kahneman, Princeton University, New Jersey
Edited by: Amos Tversky, Stanford University, California