Best Forex Broker 2018

5 stars based on 64 reviews

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In the interest of brevity and accessibility, we cast the example in terms of the most famous contemporary theory of risky choice, Cumulative Prospect Theory ( Tversky and Kahneman 1992 ). However, since our empirical illustration only considers gambles in which one can win but not lose money, one can think of the predictions as derived from certain, more general, forms of rank-dependent utility theories.

Imagine an experiment on choice under risk, in which each participant makes choices among pairs of lotteries. We concentrate on a case where we aim to analyze data separately for each participant, and where each individual repeats each pairwise choice multiple times.

Table 1 shows 25 trials of such an experiment for one participant.