Violations at the Reference Point of Discontinuity: Limitations of Prospect Theory and an Alternative Model of Risk Choices

The tilted S-shaped utility function proposed in Prospect Theory (PT) relied fundamentally on the geometrical notion that there is a discontinuity between gains and losses, and that individual preferences change relative to a reference point. This results in PT having three distinct parameters; concavity, convexity and the reference point represented as a disjoint between the concavity and convexity sections of the curve. The objective of this paper is to examine the geometrical violations of PT at the zero point of reference. This qualitative study adopted a theoretical review of PT and Markowitz’s triply inflected value function concept to unravel methodological assumptions which were not fully addressed by either PT or cumulative PT. Our findings suggest a need to account for continuity and to resolve this violation of PT at the reference point. In so doing, an alternative preference transition theory, was proposed as a solution that includes a phase change space to cojoin these three separate parameters into one continuous nonlinear model. This novel conceptual model adds new knowledge of risk and uncertainty in decision making. Through a better understanding of an individual’s reference point in decision making behaviour, we add to contemporary debate by complementing empirical studies and harmonizing research in this field. Doi: 10.28991/ESJ-2022-06-01-03 Full Text: PDF

TOPSIS method for spherical fuzzy MAGDM based on cumulative prospect theory and combined weights and its application to residential location

Nowadays, how to choose a comfortable and relatively satisfactory residence is one of the multiple attribute group decision making (MAGDM) issues which people are paying more and more attention. However, since the inaccuracy and fuzziness of the information are given by decision makers (DMs) in practical decision-making and psychological factors of DMs should be considered in the decision-making process, this paper presents TOPSIS approach based on cumulative prospect theory (CPT) to deal with the MAGDM issues under the spherical fuzzy environment. Furthermore, considering the objective relationship between the attributes, the combined weights are used to get attribute weights in spherical fuzzy sets (SFSs). Finally, an example of residential location is introduced to prove the validity of our proposed approach by comparing with spherical fuzzy TOPSIS(SF-TOPSIS) method and spherical fuzzy WASPAS (SF-WASPAS) method.

Picture fuzzy MABAC method based on prospect theory for multiple attribute group decision making and its application to suppliers selection

In the garment manufacturing industry, purchasing management is an important link. The materials of making clothes often need high cost. In addition, customers put forward a request in the quality of clothes. Thus, choosing an optimal supplier is an essential part of job. Reaching cooperation with an optimal supplier not only can help garment manufacturer improve the quality of clothes but also is benefit to reduce the cost of producing. Most importantly, it can improve the competitiveness of manufacture enterprises. So, it is important for managers to find an optimal supplier and make a cooperation with it. In this paper, we analysis an issue about choosing an optimal supplier during four different suppliers. With analyzing this problem, we can introduce an extended method under picture fuzzy environment to evaluate and choose an optimal supplier. In this article, we describe some basic knowledges about picture fuzzy sets (PFSs) and picture fuzzy numbers (PFNs). Then, we introduce the extension of MABAC method which is on the basis of prospect theory (PT) with picture fuzzy numbers (PF-PT-MABAC) and utilize the PF-PT-MABAC model to evaluate different suppliers to choose an optimal supplier. Finally, we compare the result of PF-PT-MABAC with the result of traditional MABAC, PFWG operators and traditional TODIM method to test the efficiency of PF-PT-MABAC model.