Choices, values and frames

This book presents the definitive exposition of ´prospect theory´, a compelling alternative to the classical utility theory of choice. Building on the 1982 volume, Judgement Under Uncertainty, this book brings together seminal papers on prospect theory from economists, decision theorists, and psychologists, including the work of the late Amos Tversky, whose contributions are collected here for the first time. While remaining within a rational choice framework, prospect theory delivers more accurate, empirically verified predictions in key test cases, as well as helping to explain many complex, real-world puzzles. In this volume, it is brought to bear on phenomena as diverse as the principles of legal compensation, the equity premium puzzle in financial markets, and the number of hours that New York cab drivers choose to drive on rainy days. Theoretically elegant and empirically robust, this volume shows how prospect theory has matured into a new science of decision making.
Contents: Part I. Prospect Theory and Extensions; Part II. The Certainty Effect and the Weighting Function; Part III. Loss Aversion and the Value Function; Part IV. Framing and Mental Accounting; Part V. Applications; Part VI. The Multiplicity of Value; Part VII. Choice over Time; Part VIII. Alternative Conceptions of Value; Part IX. Experienced Utility.