On the empirical validity of cumulative prospect theory: A response to the Wakker commentaries

Abstract

In Bernheim and Sprenger (2020) and Bernheim, Royer, and Sprenger (2022), we devised and implemented a new test of rank-dependent probability weighting for Cumulative Prospect Theory (CPT). This paper responds to critical commentary by Wakker (2023), which recapitulates both Abdellaoui, Li, Wakker, and Wu (2020) and Wakker (2022a). We demonstrate that the Wakker commentaries proceed from fundamental misconceptions concerning the structure of our tests, rely on unsubstantiated assertions that are falsified by evidence and robustness analyses they ignore, misrepresent our positions, and involve a host of other conceptual and methodological errors. In short, the critique lacks scientific merit.