Prospect theory: An analysis of decision under risk

Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica: Journal of the Econometric Society, 263-291. uoregon.edu 提供的 [PDF]

==notes by yinung==
近數十年來, 影響最大的文章之一, 修正了期望效用理論的一些不合理的部份。
本文大量使用機率組合之選擇,以實驗 (問受試者) 的選擇,來解釋 EU 的不合理。
==original Abstract==
This paper presents a critique of expected utility theory as a descriptive model of decision making under risk, and develops an alternative model, called prospect theory. Choices among risky prospects exhibit several pervasive effects that are inconsistent with the basic tenets of utility theory. In particular, people underweight outcomes that are merely probable in comparison with outcomes that are obtained with certainty. This tendency, called the certainty effect, contributes to risk aversion in choices involving sure gains and to risk seeking in choices involving sure losses. In addition, people generally discard components that are shared by all prospects under consideration. This tendency, called the isolation effect, leads to inconsistent preferences when the same choice is presented in different forms. An alternative theory of choice is developed, in which value is assigned to gains and losses rather than to final assets and in which probabilities are replaced by decision weights. The value function is normally concave for gains, commonly convex for losses, and is generally steeper for losses than for gains. Decision weights are generally lower than the corresponding probabilities, except in the range of low probabilities. Overweighting of low probabilities may contribute to the attractiveness of both insurance and gambling.
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Rational Expectations and the Aggregation of Diverse Information in Laboratory Security Markets

Charles R. Plott and Shyam Sunder (1988) “Rational Expectations and the Aggregation of Diverse Information in Laboratory Security Markets." Econometrica, Vol. 56, No. 5 (Sep., 1988), pp. 1085-1118. Article Stable URL: http://www.jstor.org/stable/1911360; ust.hk 提供的 [PDF].

==original Abstract==

The idea that markets might aggregate and disseminate information and also resolve conflicts is central to the literature on decentralization (Hurwicz, 1972) and rational expectations (Lucas, 1972). We report on three series of experiments all of which were predicted to have performed identically by the theory of rational expectations. In two of the three series (one in which participants trade a complete set of Arrow-Debreu securities and a second in which all participants have identical preferences), double auction trading leads to efficient aggregation of diverse information and rational expectations equilibrium. Failure of the third series to exhibit such convergence demonstrates the importance of market institutions and trading instruments in achievement of equilibrium.

Asset Valuation in an Experimental Market

Robert Forsythe, Thomas R. Palfrey and Charles R. Plott (1982) “Asset Valuation in an Experimental Market." Econometrica, Vol. 50, No. 3 (May, 1982), pp. 537-567. JSTOR |via CYCU

==original abstract==

The time path of asset prices is studied within a stationary experimental environment. After several replications prices converge to a perfect foresight equilibrium. A sequential market having an “informational trap" and a futures market are also studied.

實驗簡述:

  • 對 certificate 雙邊喊價 (double-auction), 每人一開始持有若干 (2或3) 張 certificates
  • 持有股票, 可得股利;
    • 股利每年分兩期, A 和 B 期給付;
    • 但實驗中共有三種 type 的人; 每人在A、B期可獲之股利並不相同 (如 Table I 所示)
      原文:
      Because of these differences, there are gains from exchange with one individual selling the certificate to
      another. (註: 這樣設定也是為了形成負斜率的需求線, 見下圖)
  • 不能 short-sale
  • 可多次喊價
  • 共進行 5 場實驗 (Experiment 1-5); 每次 8-9 人

理論之均衡價格

(下面方程式最後之數字是 for Experiment 1 & 2)

  • equilibrium price in period B
    • PEB = max (dB) =300
  • naive price equilibrium
    • PNA = max (dA+dB) = 400
  • perfectly forecasted theoretical equilibrium
    • PFA = max (dA)+max(dB) = 600

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實驗 1 的結果

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實驗 2 的結果

 

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實驗 3 的結果

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實驗 4 的結果

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實驗 5 的結果

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實驗紀錄表

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