Issue: 2020/Vol.30/No.4, Pages 39-56
FROM EXPECTED UTILITY THEORY TO PROSPECT THEORY: TRACKING DOWN THE EXPERIMENTAL PATH AFTER FORTY YEARS
Sławomir Kalinowski
Cite as: S. Kalinowski. From expected utility theory to prospect theory: tracking down the experimental path after forty years. Operations Research and Decisions 2020: 30(4), 39-56. DOI 10.37190/ord200403
Abstract
The expected utility theory axioms have been studied experimentally. Three of the experiments are a repetition of an earlier test in slightly changed circumstances, while the other two are original. The participants were incentivised with rewards, which did not happen in the replicated tests. The results confirmed the degeneration of the expected utility theory as a scientific research program. The evidence that resulted from the tests supported the hypothesis on the cumulative prospect theory predicting facts not forecasted by the EUT.
Keywords: economic decisions under risk, expected utility theory, cumulative prospect theory, experimental
Received: 1 July 2020 Accepted: 3 December 2020