Framework Of Prospect Theory Research Articles

A Taste of Telework: Effects of Remote Work Arrangements During and After the Global Pandemic

The COVID-19 pandemic brought unprecedented changes in global work dynamics including mandating telework for most of the U.S. federal workforce to protect employees from health and safety hazards of the communicable virus. Although not ubiquitous, many federal employees had experience with these arrangements because they voluntarily chose telework prior to the pandemic through provisions in the Telework Enhancement Act of 2010. Using the 2020 Federal Employee Viewpoint Survey (FEVS), which focuses on telework perceptions and experiences, this study explores the effect of the involuntary telework mandate on employees’ attitudes toward telework after several months through a prospect theory framework. Findings demonstrate that several factors including previous telework experience and experiential learning may influence employees’ preference for and voluntary selection into telework moving forward. These dynamics suggest an endowment effect for telework among employees who gained telework experience before and during the pandemic. In addition, employees may choose telework as an alternative work arrangement when they are not satisfied with their organizations or jobs but want to maintain employment. These findings suggest that agencies should continue to offer robust telework opportunities to satisfy and retain employees.

Determinants of Investments Decisions in Economics and Business Faculty Students at Pelita Bangsa University

The present study endeavors to undertake an in-depth analysis of the impact of financial literacy, overconfidence, and risk tolerance on investment decisions in a structured manner by employing the conceptual framework of prospect theory. The research methodology is based on quantitative research utilizing primary data obtained through the distribution of questionnaires to all the students of the business economics faculty at Pelita Bangsa University. A sample of 101 respondents was used in the research, and the data was processed using the smart-pls 3 software program with a partial least squares approach. The research findings indicate that financial literacy has a significant positive influence on investment decisions, whereas overconfidence has a positive but insignificant influence on investment decisions. Furthermore, risk tolerance has a positive and significant effect on making investment decisions. The most prominent implication of the study is found in the financial literacy section, which suggests that a deeper understanding of financial literacy can lead to more accurate investment decisions. Additionally, an investor's overconfidence and risk tolerance also play a role in making investment decisions.

Impact of the Local Dynamics on Exit Choice Behaviour in Evacuation Model

This study investigated the interplay between exit selection models and local pedestrian movement patterns within floor field frameworks. Specifically, this investigation analysed the performance of a multinomial logit exit choice model, incorporating both expected utility theory and cumulative prospect theory frameworks when coupled with three distinct local-level pedestrian movement models (FF-Von Neumann, FF-Moore, and NSFF). The expected utility theory framework considers the deterministic component as a linear relationship, while the cumulative prospect theory framework further considers the decision-maker’s risky attitudes by transforming objective terms into subjective terms using a power value function. The core objective was to comprehend how local movement dynamics, as represented by the floor field models, influence decision-making during exit selection. Comparative analyses revealed intriguing variations between the three local models, despite their shared expected utility theory-based exit choice framework. These discrepancies stemmed from the diverse pedestrian trajectory behaviours generated by each model. Consequently, these local dynamics impacted the decision-maker’s assessment of critical factors, such as the number of evacuees close to the decision-maker (NCDM) and the number of evacuees close to an exit (NCE), which the exit choice model incorporates. These assessments, in turn, significantly affected higher-level decision-making. The integration of the three models with the multinomial logit exit choice model, using either cumulative prospect theory and expected utility theory frameworks, further strengthened the observed bilateral relationship. While the specific nature of this relationship varied depending on the chosen framework and its implementation details, these consistent findings demonstrate the robustness of the results. This reinforced the influence of local-level pedestrian dynamics on higher-level exit selection, highlighting the importance of accurate crowd dynamics modelling, especially when advanced exit choice models consider local movement factors.

Determinants of investment-related FinTech services among retail investors of India: a multi-group analysis using PLS-SEM

PurposeThe purpose of this study is to investigate the factors affecting behaviour intention (BI) to use and actual usages of investment-related FinTech services among the zoomers (Gen Z) and millennials (Gen M) retail investors of India.Design/methodology/approachThe study explores the predictive relevance of actual adoption behaviour among the two different age categories of Indian retail investors. It uses the Unified Theory of Acceptance and Use of Technology-2 and the prospect theory framework as guiding frameworks. Data has been collected from 294 retail investors, actively engaged in the investment-related FinTech services. The multi-group analysis using variance-based partial least square structured equation modelling has been used to compare the two groups. The invariance between the two groups was achieved through measurement invariance assessment.FindingsThe study reveals distinct factors significantly affecting BI to use investment-related FinTech services among Gen Z and Gen M retail investors are performance expectancy (PE) to BI, perceived risk (PR) to BI, price value (PV) to BI and PR to service trust (ST).Research limitations/implicationsThis study provides insights for financial providers and policymakers, emphasizing different factors influencing BI to use investment-related FinTech services in both age groups. Notably, habit emerges as a common factor influencing the actual usage of investment-related FinTech services across Gen M and Gen Z retail investors in India.Originality/valueThis study explores the heterogeneous behaviour of the heterogenous population in the domain of technological adoption of investment-related FinTech services in India.

To behave or not (un)ethically? The meditative effect of mindfulness on statistics anxiety and academic dishonesty moderated by risk aversion

Despite the growing interest in mindfulness in higher education, the literature on its relation to decision-making under risk (i.e. academic misconduct) and statistics anxiety is scarce. The present research shall fill this gap. Based on the prospect theory, we assessed the mediating effect of mindfulness on the relationship between statistics anxiety and academic dishonesty moderated by risk aversion. Data were collected from 791 undergraduate students in six Israeli academic institutions studying for bachelor’s degrees in social sciences. Questionnaires included the following measures: risk behaviour according to the prospect theory framework, Mindful Attention Awareness Scale, Statistics Anxiety Rating Scale, Academic Misconduct Scale and sociodemographic variables. Correlations among these variables were explored. The data was analysed using Structural Equation Modelling (SEM). The results indicate that the variance in academic dishonesty is explained by students' statistics anxiety with a mediation of Mindfulness moderated by Risk Aversion. Mindfulness negatively affects Academic Dishonesty, while Risk Aversion has a significant positive effect on Mindfulness. Finally, among individuals with high statistics anxiety, Risk Averse individuals show significantly higher Mindfulness than Risk Seekers. We conclude that mindfulness-based interventions might be a constructive tool to reduce risk-taking and promote ethical decision-making among individuals who experience high levels of statistics anxiety. Furthermore, developing mindful skills may help individuals with higher anxiety levels neutralize these unwanted feelings and get along with their learning tasks. Hence, avoid academic unethical behaviours.

The Israel-Palestine Conflict from the Perspective of Prospect Theory: “Hedging” or “Speculating”

Prospect theory, which emphasizes the non-linear relationship between risk and reward, is an important concept in the fields of psychology and behavioral economics, and focuses on the decision-making process of individuals in the face of risk and uncertainty. In the field of international relations, Prospect Theory is of great significance to the study of decision-making of international actors. This paper combines the overall framework of Prospect Theory, based on the relevant theoretical doctrines of geopolitics, and sets the risk perception and potential benefit seeking of the two parties as independent variables, and the decision-making behavior and strategic choices of the two parties as dependent variables. By analyzing the behavioral patterns of the participants in the conflict and exploring their “hedging” and “speculative” behavioral choices, we can better understand their decision-making process and perhaps provide valuable insights into their search for a peaceful solution.

New Computing Tasks Offloading Method for MEC Based on Prospect Theory Framework

Mobile edge computing (MEC) provides reliable solutions for networked vehicles, mobile phones, and other mobile devices to complete intensive computing and delay-sensitive tasks. Most of the existing studies design a series of methods to achieve the expected goals based on assuming that users are absolutely rational. However, due to the subjectivity of users, the actual results will deviate from the real situation. Using the prospect theory (PT) framework, this article studies the problem of computing task offloading in real situations. Aiming at the task offloading problem in the small cellular network scenario, the artificial fish swarm algorithm is used to optimize the system energy with limited delay. Finally, the experimental tests verify the impact of user behavior on the system energy optimization and the effectiveness of the task offloading method proposed in this article.

A note on European farmers' preferences under cumulative prospect theory

AbstractExplaining farmer decision making using cumulative prospect theory is of increasing importance. We present a systematic review on European farmers' preferences under the cumulative prospect theory framework. We identified 17 studies covering 2324 farmers from 12 European countries. All studies report that (on average) farmers are: (i) risk averse, (ii) loss averse, and (iii) overweight small probabilities and underweight large probabilities. However, there is a large heterogeneity across and within studies. These findings have implications for the analysis and design of policy and insurance.

The worsening divergence of biotechnology: the importance of risk culture.

In the last 20years, the field of biotechnology has made significant progress and attracted substantial investments, leading to different paths of technological modernization among nations. As a result, there is now an international divide in the commercial and intellectual capabilities of biotechnology, and the implications of this divergence are not well understood. This raises important questions about why global actors are motivated to participate in biotechnology modernization, the challenges they face in achieving their goals, and the possible future direction of global biotechnology development. Using the framework of prospect theory, this paper explores the role of risk culture as a fundamental factor contributing to this divergence. It aims to assess the risks and benefits associated with the early adoption of biotechnology and the regulatory frameworks that shape the development and acceptance of biotechnological innovations. By doing so, it provides valuable insights into the future of biotechnology development and its potential impact on the global landscape.

How Do Risk Preferences Affect Golf Course Superintendents’ Adoption of Precision Irrigation Technologies? Implications from Prospect Theory

AbstractPrecision irrigation is a potential viable strategy for water use reductions on golf courses by making variable or site-specific irrigation applications. A group of US golf course superintendents were surveyed to examine whether and how superintendents’ risk preferences (attitudes) affect the adoption decisions of precision irrigation technologies on their golf courses. Under the prospect theory (PT) framework, a lottery experiment was used to elicit the measures of three risk attitudes, that is, risk curvature, probability distortion, and loss aversion. Using these three measures and other questions in the survey, we found that risk curvature has a significant positive effect on the precision irrigation technologies adoption on golf courses, while probability distortion affects the adoption negatively. Compared to the golf course in low precipitation areas, superintendents’ risk attitudes are more likely to affect the precision irrigation technologies adoption in the golf course in high precipitation areas. Additionally, risk curvature dominates the adoption decisions for newer technologies, while probability distortion dominates the older technologies adoption decisions. Our research enriches the literature on the decision-making behaviors of managers by considering how probability distortion, a factor typically ignored by other studies, affects technology adoption decisions and adds to the literature on examining the technology adoption behaviors under PT by focusing on golf course superintendents, a group that has not been studied.

A consensus model under framework of prospect theory with acceptable adjustment and endo-confidence

Consensus is an important issue in group decision making to make a reliable and scientific decision, and it has become a hot topic recently. Due to the complexity and uncertainty of decision-making problems, several aspects of alternatives should be considered in decision-making process. Also, the bounded rational characteristics of decision makers (DMs) may significantly affect the decision results. This paper proposes a multi-criteria consensus model based on prospect theory (PT) to consider the unsymmetrical risk attitudes of DM for gain or loss and on endo-confidence (confidence which is derived by DMs’ evaluation information) levels of DMs to determine their weights. First, the reference point in PT is selected and how to measure the prospect consensus degree is presented. Then, the way to identify the expert who need to modify his/her evaluation is given and two programming models are proposed to obtain the updated evaluation. Subsequently, both the overall difference and the endo-confidence level of the DM are used to determine the weights of DMs. Finally, an illustrative example and the comparative analysis are used to demonstrate the feasibility of the proposed model.

Dealing with low‐probability shocks: The role of selected heuristics in farmers’ risk management decisions

Dealing with weather extremes is a major challenge for farmers and often comes at high costs for public budgets. Therefore, we investigate the influence of specific simplified decision rules, so-called heuristics, on farmers’ willingness to pay (WTP) for protecting themselves against low-probability and high-consequence weather shocks. To this end, we conducted a framed field experiment with 237 farmers in Germany, using incentivized lottery-based multiple price lists. We explored the effects of different heuristics within the prospect theory framework. Our results indicate that, on average, farmers exhibit risk-loving behavior towards monetary losses, leading to a low WTP for risk mitigation. The results also suggest that the imitation heuristic, shock experience heuristics, and the threshold of concern heuristic influence farmers’ WTP. Farmers specifically imitate successful farmers when these are risk-loving. The lack of personal experience with low-probability events induces farmers to assign less weight to low-probability shocks, which lowers their WTP. Farmers also systematically assign less weight to low-probability shocks that they consider “too rare to be concerned about.” Accounting for the use of these heuristics can help design improved risk management instruments and policies.

Probabilistic linguistic evolutionary game with risk perception in applications to carbon emission reduction decision making

Carbon emission reduction, an effective way to facilitate carbon neutrality, has gained increasing attention in government policy and scientific research. However, the establishment of a sustainable carbon emission reduction market is a complex game between governments and enterprises. In addition, it is difficult to obtain precise evaluations of the political and environmental factors in most cases. Irrational enterprises with a profit-seeking nature bring challenges to the strategy selection. To bridge this gap, we propose a probabilistic linguistic evolutionary game to model strategic behavior in carbon emission reduction assistant decision making. First, we introduce a probabilistic linguistic payoff matrix to describe the uncertain payoffs of players. A new distance measure for the probabilistic variables is also proposed to construct the prospect payoff matrix in the prospect theory framework. Then, the evolutionary dynamics and the probabilistic linguistic evolutionary stability of the proposed methods are analyzed. A comprehensive case study for carbon emission reduction with comparisons is presented for validation.

A neuronal prospect theory model in the brain reward circuitry

Prospect theory, arguably the most prominent theory of choice, is an obvious candidate for neural valuation models. How the activity of individual neurons, a possible computational unit, obeys prospect theory remains unknown. Here, we show, with theoretical accuracy equivalent to that of human neuroimaging studies, that single-neuron activity in four core reward-related cortical and subcortical regions represents the subjective valuation of risky gambles in monkeys. The activity of individual neurons in monkeys passively viewing a lottery reflects the desirability of probabilistic rewards parameterized as a multiplicative combination of utility and probability weighting functions, as in the prospect theory framework. The diverse patterns of valuation signals were not localized but distributed throughout most parts of the reward circuitry. A network model aggregating these signals reconstructed the risk preferences and subjective probability weighting revealed by the animals’ choices. Thus, distributed neural coding explains the computation of subjective valuations under risk.

A Bayesian Modeling Approach to Examine the Role of Testosterone Administration on the Endowment Effect and Risk-Taking

Financial risk-taking and loss aversion are multifaceted phenomena that are the focus of neuroscience, psychology, and economics research. A growing number of studies highlighted the role of hormones (particularly of testosterone) on socio-economic decision-making. However, the effects of testosterone on risk-taking under framing and consumer-based choices and preferences are inconclusive. We investigated the effects of 100 mg testosterone administration on aspects of decision-making within the Prospect Theory framework which is the most used descriptive model of decision-making under risk. We assessed risk-taking under framing and the endowment effect (effect of possession) using Bayesian modeling. Forty men participated in this double-blind placebo-controlled fully-randomized cross-over experiment and performed two tasks. One was a risk-taking task with binary choices under positive and negative framing associated with different probabilities. In the second task participants had to bid money for hedonic and utilitarian items. We observed a significant increase in serum testosterone concentrations after transdermal application. Compared to placebo, testosterone administration increased risk-taking under the positive framing (very large effect size) and decreased under the negative framing (moderate to small). The sensitivity to gain was positive in each framing. Our model showed that decision-making is jointly influenced by testosterone and the trade-off between gains and losses. However, while the endowment effect was more pronounced for hedonic than for utilitarian items, the effect was independent of testosterone. The findings provide novel information on the complex modulatory role of testosterone on risk-taking within the framework of prospect theory and shed light on mechanisms of behavioral economic biases. The proposed models of effects of individual differences in testosterone on risk-taking could be used as predictive models for reference-depended behavior under positive and negative framing with low and high probabilities.

Understanding Electric Bicycle Users’ Mode Choice Preference under Uncertainty: A Case Study of Shanghai

The electric bicycle is considered as an environmentally friendly mode, the market share of which is growing fast worldwide. Even in metropolitan areas which have a well-developed public transportation system, the usage of electric bicycles continues to grow. Compared with bicycles, the power transferred from the battery enables users to ride faster and have long-distance trips. However, research on electric bicycle travel behavior is inadequate. This paper proposes a cumulative prospect theory (CPT) framework to describe electric bicycle users’ mode choice behavior. Different from the long-standing use of utility theory, CPT considers travelers’ inconsistent risk attitudes. Six socioeconomic characteristics are chosen to discriminate conservative and adventurous electric bicycle users. Then, a CPT model is established which includes two parts: travel time and travel cost. We calculate the comprehensive cumulative prospect value (CPV) for four transportation modes (electric bicycle, bus, subway and private car) to predict electric bicycle users’ mode choice preference under different travel distance ranges. The model is further validated via survey data.

Behavioral Analysis of Stock Returns Based on Assets Pricing Models in the Framework of Prospect Theory: Evidence from Companies Listed on the Tehran Stock Exchange

بخش عمده تحقیقات دو دهه اخیر در حیطه مدل های ارزش گذاری دارایی ها، شناخت دقیق تر متغیرهای تاثیرگذار بر بازده سهام و در نهایت کاهش خطاها و توضیح بهتر بازده سهام در این مدل ها بوده است. از سوی دیگر طی سال های گذشته تحقیقات گسترده ای در خصوص مباحث مالی رفتاری در خصوص توضیح بازده سهام توسط ویژگی های روانشناختی و رفتاری سرمایه گذاران انجام گرفته است. در این راستا این پژوهش در پی تحلیل رفتاری بازده سهام براساس مدل های قیمت گذاری دارایی ها در چارچوب نظریه چشم انداز در شرکت-های پذیرفته شده در بورس اوراق بهادار تهران بوده است. این پژوهش با استفاده از نمونه ای شامل 120 شرکت پذیرفته شده در‌ بورس اوراق بهادار تهران در دوره زمانی سال های 1387 تا 1399 و با استفاده از رویکرد رگرسیونی فاما-مکبث انجام گرفته است. نتایج بدست آمده نشان می دهد که نظریه چشم انداز تاثیری معنادار بر توضیح بازده سهام در مدل‌‌های ارزش گذاری دارایی های سرمایه ای، مدل سه عاملی فاما و فرنچ و مدل پنچ عاملی فاما و فرنچ داشته است، به طوری که با ورود نظریه چشم انداز به این مدل ها، بازده توضیح داده نشده آنها به شکل معناداری کاسته شده است.

The Hybridisation of Conflict: A Prospect Theoretic Analysis

Revisionist actors are increasingly operationalising a broad number of non-violent threats in their quest to change the status quo, popularly described as hybrid conflict. From a defensive point of view, this proliferation of threats compels nations to make difficult choices in terms of force posture and composition. We examine the choice process associated with this contemporary form of state competition by modelling the interactions between two actors, i.e., a defender and a challenger. As these choices are characterised by a high degree of uncertainty, we study the choice from the framework of prospect theory. This behavioural–economic perspective indicates that the defender will give a higher weight and a higher subjective value to conventional threats, inducing a higher vulnerability in the domain of hybrid deterrence. As future conflict will increasingly involve choice dilemmas, we must balance threats according to their probability of occurrence and their consequences. This article raises awareness regarding our cognitive biases when making these choices.

Satisfaction and Expenditure in Wineries: A Prospect Theory Approach

Visitor satisfaction has been shown to be a critical determinant of visitor expenditure in wineries. Although the relationship between visitor satisfaction and expenditure in wineries has been investigated in previous literature, we have unearthed potential intricacies that emerge when this relationship is analyzed within the reference dependence framework of prospect theory. To fill this gap, we use segment-based reference points to capture the singularity of winery visitors, and results show that demographics and psychographics confirm reference dependence. When reference points are based on psychographics, loss aversion is confirmed (lowering visitor satisfaction has a greater negative impact on expenditure than the positive impact derived from increasing visitor satisfaction), while diminishing sensitivity is observed for losses (the effect of the variations in visitor satisfaction shifts depending on the distance from the individual’s reference point). Interestingly, when the reference points are obtained through demographics, loss aversion is reversed. Relevant managerial implications are outlined.

How pandemic severity moderates digital food ordering risks during COVID-19: An application of prospect theory and risk perception framework

COVID-19 presents both challenges and opportunities to the hospitality industry. The purpose of this study is to examine the effects of perceived risk on intention to order digital food deliveries during the pandemic. Drawing upon the prospect theory and risk perception framework, the study proposed and tested an integrated model of perceived risk with a moderating role of pandemic severity. The results prove the negative impact of perceived risk on purchase intention and identify company's competency as an antecedent of perceived risk. However, consumers' knowledge regarding COVID-19 fails to predict their perceived risk. Different moderating effects are revealed based on pandemic severity. The effect of perceived risk on purchase intention is moderated by self-efficacy in severe pandemic regions, whereas by risk propensity in mild pandemic regions. The findings offer empirical evidence and managerial suggestions to assist hospitality businesses' crisis marketing and risk management.