Prospect Theory in the Wild: Evidence from the Field

Abstract

1 In rank-dep ende nt a ppr oaches , t he we ight s at tached to outcomes are differ ence s in weighted cumulative probabilities.For example, if the outcomes are ordered x 1 > x 2 > ... > x n , the weight on outcome x i is À(p 1 + p 2 + ... p i )-À(p 1 + p 2 + ....p i-1 ).( Not ice that if À (p) =p t his weight is just the probability p i. ).In cumulative prospect t heory gains and losses are ranked and weighted separately (by magnitude). 1 Prospect theory in the wild:Evidence from the field