Talk:Prospect theory

Introduction and figure wrong

"Losses hurt more than gains feel good (loss aversion). This differs greatly from expected utility theory, in which a rational agent is indifferent to the reference point. In expected utility theory, the individual only cares about absolute wealth, not relative wealth in any given situation."

This part is just wrong, nowhere in expected utility theory is defined how the utility function is shaped, loss aversion can be a part of it. — Preceding unsigned comment added by 141.44.202.15 (talk) 10:56, 28 November 2011 (UTC)

The figure is wrong: the curve has a kink at the origin. That's the whole point; see Fig. 3 in Daniel Kahneman; Amos Tversky Econometrica, Vol. 47, No. 2. (Mar., 1979), pp. 263-292. I do not know enough about prospect theory to fix this page, but enough to know that what's there right now misses an essential part of the approach.Nighster (talk) 15:19, 17 December 2012 (UTC)Nighster

stuff removed

Is there a reason this article has been removed? Dieter Simon 23:30 12 Jun 2003 (UTC)

I've removed this dead link

• Cornell University Lecture Notes on Behavorial Economics and Prospect Theory

we need something good to replace it TitaniumDreads 14:15, 9 Jun 2005 (UTC)

Proposal to add a section that discusses policy applying prospect theory (loss aversion) within our educational system.

Prospect theory, specifically loss aversion has recently been tested by notable scholars and more recently by Dr. Roland Fryer and has shown positive behavior change of educators within the educational system. I would like to add a section showing other applications of prospect theory within this setting. I have been studying within the field of education and administration for the last 10 years and I hold a doctorate in Educational leadership and Administration from an accredited university in the U.S. I do not plan to add any independent research within this topic and will present my additions in a neutral and verifiable manner. Please let me know if there are any comments, suggestions, or objections to my intended addition. Fmerenda 19:57, 11 December 2012 (UTC) — Preceding unsigned comment added by Fmerenda (talk • contribs)

In the absence of any objections I will begin to add a section regarding the above research utilizing loss aversion from behavioral economics to illustrate a policy that relies upon a specifically framed merit pay intervention.Fmerenda 05:39, 12 December 2012 (UTC) — Preceding unsigned comment added by Fmerenda (talk • contribs)

Hi, firstly, if you do not have an account I suggest you get one and then sign any comments/posts/edits etc you make so that you can stay advised of responses etc. Regarding your proposal for adding a section it sounds to me that a simple note as to the application you refer to would suffice. I suggest that the aricle is about the theory itself rather than about any specific application or illustrations of it so any addition you wish to make should stay focused and on topic. An example of the way this could be done would be to use the research you refer to as a citation to substantiate the pertinent statements in the article as it stands. --LookingGlass (talk) 20:34, 12 December 2012 (UTC)

Hi, thank you for your feedback. I respectfully disagree however, I believe adding content to explain its application and using real-world examples should be more than a simple note. The article as it stands has a section entitled application, but does not provide any examples of its application. Additionally, reading the other comments, it seems many people do not fully understand prospect theory and providing examples of its application may assist with clarity. Thoughts? Fmerenda 00:54, 13 December 2012 (UTC) — Preceding unsigned comment added by Fmerenda (talk • contribs)

I apologise, you seem to have an account. Please sign your comments with four tilds "~" or by clicking on the pen icon in the menu bar of the comment box.

Regarding your proposals, an example should be subservient to that which it is an example of. The key is balance. As the article sets out: "Prospect theory is a behavioral economic theory that describes decisions between alternatives that involve risk, where the probabilities of outcomes are known". Your example is of its application in a particular field however it can be applied in any field.

In my opinion the cause of the article's lack of clarity is that the article doesn't align with wiki style guidelines. In these it is recommended that articles proceed from the general to the specific in such a way that the subject can be understood by a general non-specialist reader. As it is, the article lacks an adequate introduction, has no sections that expand on the introduction, or adequately explain its history and development, etc. Instead, the article quickly moves into a technical formula and brief explantion/description rather than any general introduction. The article also has no in-line references/citations. Those references that are given are non-specific and so cannot be reasonably verified or tied to the text. The style of the article is not encyclopedic but rather colloqial and chatty, like a magazine article in my opinion. If these matters were addressed any need to fill out the examples section would be significantly reduced.

Finally, I think that consideration should be given to either creating new articles, if the subject of the example is substantive, or of adding into other pertinent articles sections on the use of Prospect Theory in their topic.

LookingGlass (talk) 19:32, 13 December 2012 (UTC)

I agree that the article could be more aligned with the items you mentioned for clarity purposes, readability, and wiki style guidelines. Those issues need to be addressed. However, I still feel that giving real-world applications within any field will also help. It isn't the fact that it can be utilized in various manners/fields, but more importantly how it is used and the behavioral reasoning of why it works. By providing examples in Education and of course others can add other fields it has been applied to, may enable readers to put it all together. Thoughts? Fmerenda 04:16, 14 December 2012 (UTC) — Preceding unsigned comment added by Fmerenda (talk • contribs)

Fmerenda, you seem either to not understand or to disregard the two points I made, both of which regard wiki practice:

1. You continue to NOT to sign your comments.

2. "an example should be subservient to that which it is an example of". I see no purpose in reiterating an expansion of that.

--LookingGlass (talk) 06:10, 14 December 2012 (UTC)

I do respectfully disagree again, yet I do understand what you are stating. I do think the topic should be made clearer, but additionally an example of the topic is just as important, if not more to provide clarity for the readers. It doesn't have to be one or another.

You disagree and yet do not say with WHAT! I have NOT written that examples CANNOT provide clarity. LookingGlass (talk) 12:37, 15 December 2012 (UTC)

Not sure why when I sign the comments, it is not appearing that way all the time.

Sign your articles by clicking the icon (at the top) OR just type four tilds "~". Do ONLY one of these and you will have no problem. LookingGlass (talk) 12:37, 15 December 2012 (UTC)

Although I appreciate the comments of "LookingGlass", I would also appreciate others points of view as well, in order to make an informed decision regarding my addition and how the COMMUNITY feels about it. Fmerenda 16:07, 14 December 2012 (UTC) Fmerenda 16:07, 14 December 2012 (UTC) — Preceding unsigned comment added by Fmerenda (talk • contribs) Fmerenda 05:58, 15 December 2012 (UTC)

You ask for comment but do not address what is offered. What, exactly, are you seeking? LookingGlass (talk) 12:37, 15 December 2012 (UTC)

Hi:

I beleive I have addressed the comments thus far. Just because I don't agree with the comments made, doesn't mean I haven't addressed them and have not provided the reasons I don't agree. The article needs edits in many areas for clarity, I would like to address the clarity issue by providing real-world examples in a devoted section. Since it seems you want to address other areas of the article, and do not agree with my reasoning, I respectfully welcome comments and perspectives from others, so an informed decision can be made, based on how more than one member of the community feels. Fmerenda 22:14, 18 December 2012 (UTC) Fmerenda 22:14, 18 December 2012 (UTC) — Preceding unsigned comment added by Fmerenda (talk • contribs)

Examples

The table is a bit confusing: it would help if the settlement was specified instead of just "favorable" or "unfavorable". Now it looks as if one would prefer a 5% chance of winning money over a 95% chance of winning the same amount. I assume what is meant is something like:

• 95% chance to win $10,000. Fear of disappointment. RISK AVERSE. Accept $9,000 settlement
• 5% chance to win $10,000. Hope of large gain. RISK SEEKING. Reject $1,000 settlement
• 95% chance to lose $10,000. Hope to avoid loss. RISK SEEKING. Reject paying $9,000 settlement
• 5% chance to lose $10,000. Fear of large loss. RISK AVERSE. Accept paying $1,000 settlement Ssscienccce (talk) 06:35, 23 March 2014 (UTC)

I have to say that the example section is a pretty good illustration of how you can take a fairly simple concept and turn it into text even people who understand the theory will be confused by. The point in an example is to explain it to people who don't understand the theory (it's actually a very simple theory) not to throw excessive amounts of terminology at people. 82.26.17.69 (talk) 22:55, 4 January 2016 (UTC)

Badly worded sentence

"A little more in depth when looking at probability distortion is that..."

Did the writer mean to say, perhaps, "Looking more deeply at probability distortion, it means that..."

I'm not sure, or I would just re-write it myself. GeneCallahan (talk) 06:11, 13 May 2015 (UTC)