Risk: The long and the short

Amos Tversky; Maya Bar-Hillel

doi:10.1037/0278-7393.9.4.713

Risk: The long and the short

Amos Tversky^*, Maya Bar-Hillel

^*Corresponding author for this work

Department of Psychology

Research output: Contribution to journal › Article › peer-review

51 Scopus citations

Abstract

Rebuts L. Lopes's normative objections to expected utility theory and analyzes the "fallacy of large numbers," discussed by P. A. Samuelson (1963), from both mathematical and psychological standpoints. It is suggested that values in risky decisions are gains and losses defined relative to some reference point. Because the value function tends to be concave for gains and convex for losses, the shift of the reference point can produce systematic reversals of preferences. (6 ref) (PsycINFO Database Record (c) 2006 APA, all rights reserved).

Original language	English
Pages (from-to)	713-717
Number of pages	5
Journal	Journal of Experimental Psychology: Learning, Memory, and Cognition
Volume	9
Issue number	4
DOIs	https://doi.org/10.1037/0278-7393.9.4.713
State	Published - Oct 1983

Keywords

analysis of P. A. Samuelson's theorem
mathematical vs psychological perspectives, decision making under risk, criticism of L. Lopes's article &

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10.1037/0278-7393.9.4.713

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AB - Rebuts L. Lopes's normative objections to expected utility theory and analyzes the "fallacy of large numbers," discussed by P. A. Samuelson (1963), from both mathematical and psychological standpoints. It is suggested that values in risky decisions are gains and losses defined relative to some reference point. Because the value function tends to be concave for gains and convex for losses, the shift of the reference point can produce systematic reversals of preferences. (6 ref) (PsycINFO Database Record (c) 2006 APA, all rights reserved).

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Risk: The long and the short

Abstract

Keywords

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