scholarly journals Behavioral decision research is not a Linda problem: Comment on Regenwetter, Robinson, and Wang (in press)

2021 ◽  
Author(s):  
David Kellen
Keyword(s):  
Decision Making ◽  
Prospect Theory ◽  
Critical Analysis ◽  
Aggregate Level ◽  
Seminal Paper ◽  
Behavioral Decision ◽  
Linda Problem ◽  
Decision Research

Regenwetter, Robinson, and Wang (in press) argue that research on decision making is plagued with conjunction fallacies or “Linda Effects”. As a case study, they provide a critical analysis of Kahneman and Tversky’s seminal paper on Prospect Theory and its 1992 sequel. This commentary evaluates their criticisms and ultimately finds them to be predicated on a number of misconceptions. As argued below, a reliance on stylized effects at the aggregate level is perfectly legitimate when dismissing a received view and first proposing a new account that organizes said effects in theoretically-meaningful ways.

Decision-making of investment in navigation safety improving schemes with application of cumulative prospect theory

2018 ◽  
Vol 232 (6) ◽  
pp. 710-724 ◽  
Author(s):  
Lei Wang ◽  
Qing Liu ◽  
Tongle Yin
Keyword(s):  
Decision Making ◽  
Prospect Theory ◽  
Investment Decision ◽  
Cumulative Prospect Theory ◽  
Decision Makers ◽  
Investment Decision Making ◽  
Risk Appetite ◽  
Safety Investment ◽  
Navigation Safety

Navigation safety improving investment aims at mitigating risk and improving safety of shipping system, while decision-makers’ attitudes toward the uncertainty of shipping safety possess a characteristic of “bounded rationality.” To study the tendency of shipping safety investment decision-making with different risk perception and appetite, a decision-making method based on cumulative prospect theory is proposed in this article. First, we extract the decision attributes through analyzing the factors affecting shipping safety investment. Then, according to cumulative prospect theory, the value function and the probability weighting function for calculating cumulative prospect values of shipping investment attributes are given. Under the risk-based multi-attribute group decision-making framework, linear programming model and projection method are introduced to aggregate the weights of attributes and decision-makers, respectively. Furthermore, through a case study, the proposed methodology is utilized in Three Gorges Dam area, and the desirable safety investment scheme is determined from a set of candidate alternatives. The case study shows not only validity and feasibility of the decision-making approach but also the mechanism of shipping safety investment decision-making with consideration of the behavior characteristics of decision-makers such as reference dependence, risk appetite distortion, and loss aversion.

Decision making in the pre-development stage of residential development

2017 ◽  
Vol 35 (2) ◽  
pp. 160-183 ◽  
Author(s):  
Satakhun Kosavinta ◽  
Donyaprueth Krairit ◽  
Do Ba Khang
Keyword(s):  
Decision Making ◽  
Prospect Theory ◽  
Development Stage ◽  
Residential Development ◽  
Content Type ◽  
Expert Interview ◽  
To Receive ◽  
Fourfold Pattern ◽  
Practical Implications

Purpose The purpose of this paper is to investigate the rationality of the decision making of residential developers in Thailand. Exploring its implications in the residential development field, the researchers propose the famous prospect theory as the primary cause of developers’ incompetent decisions during the pre-development stage of residential development. Design/methodology/approach The methodologies used in this research include literature review, expert interview, and experimental questionnaire. Findings The results show that Thai developers exhibit all five aspects of prospect theory: loss aversion, fourfold pattern, bias from rare events, mental accounting, and preference reversals (PR); however, in contrast to previous literature, the researchers found that Thai developers always choose to receive gains, and usually make risky choices to avoid losses, even if the risk of loss is low. Moreover, status quo bias has a low influence on Thai developers: they tend to become attached to the areas they develop, but remain flexible in selecting a project type that fits the land. In addition, PR and the framing effect affect only some groups of developers. Practical implications This research provides awareness to professionals in the residential development field to make sound judgements, using Thailand as a case study. Originality/value This paper reveals the existence of the unproven prospect theory in the residential development field using an empirical study in Thailand as a case study.

On the Power of a Clear Definition of Rationality

1998 ◽  
Vol 8 (3) ◽  
pp. 477-480 ◽  
Author(s):  
Max H. Bazerman ◽  
David M. Messick
Keyword(s):  
Decision Making ◽  
Clear Definition ◽  
Managerial Decision ◽  
Managerial Decision Making ◽  
Behavioral Decision ◽  
Definition Of ◽  
Decision Research

Abstract:In this paper, we argue that the use of the term “rationality” in Judgment in Managerial Decision Making (JMDM) is extremely useful, and creates a useful dialogue between philosophical and psychological perspectives of ethics and morality. We conclude that while behavioral decision research can gain important insights by more fully including philosophical discussions of rationality, both intellectual communities should be clear in their definitions, provide falsifiable predictions, and offer insights that can be tested empirically. We believe that these are important contributions of behavioral decision research not currently incorporated in philosophical critiques.

How Social Culture Impacts Young Executive Decision Making in a Context of Uncertainty

2018 ◽  
pp. 55-72
Author(s):  
Kenneth David Strang ◽  
Narasimha Rao Vajjhala
Keyword(s):  
Decision Making ◽  
Literature Review ◽  
Social Science ◽  
Critical Analysis ◽  
Controlled Experiment ◽  
Uncertain Information ◽  
Social Culture ◽  
Executive Decision Making ◽  
High Degree

In this chapter, we explore social science theories that could explain how executives make decisions in contexts with a high degree of uncertainty. In particular we focus on how emerging young executives respond to risk in situations of uncertainty. First, we conduct a literature review followed by a critical analysis of socio-cultural decision-making literature. Then we performed a controlled experiment using a sample of senior university students to represent young executives. A context of uncertainty was designed which required the participants to work in small teams and make a decision based on incomplete and uncertain information about a managerial case study. In this way, we intended to illustrate what aspects of culture impacts decision making in a context of uncertainty.

BEHAVIORAL DECISION MAKING WITH COMBINED STATES UNDER IMPERFECT INFORMATION

2013 ◽  
Vol 12 (03) ◽  
pp. 619-645 ◽  
Author(s):  
RAFIK A. ALIEV ◽  
WITOLD PEDRYCZ ◽  
OLEG H. HUSEYNOV
Keyword(s):  
Decision Making ◽  
Prospect Theory ◽  
Expected Utility ◽  
Imperfect Information ◽  
Wide Spectrum ◽  
Real Life ◽  
Suggested Approach ◽  
Behavioral Decision Making ◽  
Behavioral Decision ◽  
Special Cases

Behavioral decision making is an area of multidisciplinary research attracting growing interest of scientists and practitioners, economists, and business people. A wide spectrum of successful theories is present now, including Prospect theory, multiple priors models, studies on altruism, trust and fairness. However, these theories are developed for precise and complete information, whereas real information concerning a decision maker's (DM) behavior and environment is imperfect, qualitative, and, as a result, often described in natural language (NL). We suggest an approach based on modeling a DM's behavior by a set of states. Each state represents a certain principal behavior. In our approach, states of nature and DM's states constitute a single space of combined states. For formalizing relevant information described in NL, we use fuzzy set theory. The utility model is based on Choquet-like integration over combined states. The investigations show that Expected Utility, Choquet Expected Utility and Cumulative Prospect Theory are special cases of the suggested approach. We apply the suggested approach to solving a benchmark and a real-life decision problem. The obtained results show validity of the suggested approach.

MULTIPLE ATTRIBUTE DECISION MAKING WITH MULTIPLE FORMATS OF ATTRIBUTE ASPIRATIONS: A METHOD BASED ON PROSPECT THEORY

2013 ◽  
Vol 12 (04) ◽  
pp. 711-727 ◽  
Author(s):  
ZHI-PING FAN ◽  
XIAO ZHANG ◽  
YAN-RU ZHAO ◽  
FA-DONG CHEN
Keyword(s):  
Decision Making ◽  
Prospect Theory ◽  
Multiple Attribute Decision Making ◽  
Reference Points ◽  
Weighting Method ◽  
Multiple Attribute ◽  
Ranking Of Alternatives ◽  
Simple Additive Weighting ◽  
Gain Loss

In this paper, a method based on prospect theory is proposed to solve the multiple attribute decision making (MADM) problem with three formats of attribute aspirations. According to the idea of prospect theory, reference points concerning attributes are first determined. Then, for the three formats of attribute aspirations, the calculation formulae of alternatives' gains/losses concerning attributes are given. By calculating each alternative's gain/loss, a gain–loss matrix is constructed. Further, using the value function from prospect theory and the simple additive weighting method, the overall prospect value of each alternative is calculated. Based on the obtained overall prospect values, a ranking of alternatives can be determined. Finally, a case study is given to illustrate the use of the proposed method.

scholarly journals ECONOMIC BEHAVIOR AND DECISION MAKING: СASE STUDY

2019 ◽  
pp. 192-210
Author(s):  
T. Kononovich ◽  
T. Nepokupna ◽  
K. Mіаsoid
Keyword(s):  
Decision Making ◽  
Prospect Theory ◽  
Rational Expectations ◽  
Economic Behavior ◽  
Dominant Factor ◽  
Case Study Method ◽  
Von Neumann ◽  
History Of ◽  
The Subject

The subject of the article is the process of making an economic decision. The stages of the history of economic-psychological researches – economic psychology, behavioral economy, psychology of economic behavior are distinguished. The contribution to the study of the psychological factors of the economic behavior of the winners of the Nobel Prize in Economics is shown. The theory of rational expectations of John von Neumann and O. Morgerstern Is characterized, particular attention is paid to the prospect theory of D. Kaneman and A. Tversky. The latter is presented in the form of heuristic decision making – representativeness, availability, adjustment, and anchoring, in addition, with the distinction of rational and irrational moments of this process. It is stated that the corresponding model of decision making does not take into account and that behind the economic- psychological lies in the actual psychological logic that a person makes decisions based on his own strategy, coping. The concept of decision making is substantially incomplete. Opportunity of the possibility of specification of the prospect theory of by the Case Study method – the analysis of a particular case of economic behavior opens. The Melbourne decision making questionnaire applies, the factors of this process – vigilance, back-passing, procrastination, and hypervigilance are manifest. The investigator is given the instruction to make an expanded comment on every statement, to explain own argumentation, as well as the obtained result. The rational and irrational components of its solution and features of coping are analyzed. It is determined that vigilance is the dominant factor, it turns out to be the most productive way of decision making. A model of coping of decision making, which specifies the theory of the prospects of D. Kaneman and A. Tversky and expands the limits of its application in the field of psychology of human economic behavior, is constructed.

scholarly journals The Act of Improvisation within the work of Tacita Dean

2013 ◽  
Vol 8 (2) ◽  
Author(s):  
Andrew Sneddon
Keyword(s):  
Decision Making ◽  
Creative Process ◽  
Critical Analysis ◽  
Visual Art ◽  
Decision Making Process ◽  
Art Practice ◽  
The Relationship ◽  
Diamond Ring

This paper sets out to explore the practice of Tacita Dean and in particular the exhibition project, 'An Aside', 2005 in order to fully examine the notion of improvisation within visual art practice. Through this exhibition, Dean draws together a number of other artists that at first seem unrelated and made up of diverse objects in a deceptively provocative exhibition. By conducting a critical analysis of Dean's practice and considering her welcoming of chance, contingency, and chaos, the paper will develop a new understanding and awareness of how sagacity (defined here as "sage-like," or to have the wisdom to recognise something complex) and improvisation co-habit the creative process. By considering Dean's breadth of practice as a case study, we are provided with a number of projects that have initially 'failed,' presenting the artist with an opportunity to improvise. By bringing together 'Prisoner Pairs' (2008), 'Banewl' (1999) and 'Diamond Ring' (2002), Dean demonstrates the creative impulse and ability to respond to serendipitous discoveries and to allow the unimaginable. The paper considers the role of sagacity and its ability to be used as a framing device through which the decision-making process of the artist is revealed. Serendipity also appears to have a bearing on the artist's ability to improvise. As Dean has said, "uninvited disappointments which are unbelievably painful at the time become productive in hindsight." Finally, the paper will consider the relationship between sagacity, improvisation, serendipity, and the temporal, which is also a component within the case studies.

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