Floris Heukelom () (Faculty of Economics, Universiteit van Amsterdam)
Abstract
The origin of prospect theory is the desire to test the intuitive statistician in the real world. The development of this theory by the cognitive psychologists Kahneman and Tversky can be traced to the formers work in cognitive psychophysics, in which deviations from average behavior are termed (statistical) errors; and the latters work on decision theory, with its normative vs. descriptive framework. The combination of these two types of probabilistic psychology culminated in a new descriptive theory of human decision making in the real world, coined Heuristics and Biases. The 1979 Econometrica article applies this new descriptive theory to economists EUT. It equates the intuitive statistician with the rational economic man and shows how it descriptively fails.
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Find related papers by JEL classification: B31 - Schools of Economic Thought and Methodology - - History of Thought: Individuals - - - Individuals B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
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