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Expected Subjective Value Theory (ESVT): A Representation of Decision Under Risk and Certainty

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  • Glimcher, Paul W.
  • Tymula, Agnieszka A.

Abstract

We present a descriptive model of choice with normative foundations based on how the brain is thought to represent value. An individual’s behavior is fully described by two primitives: an individual’s expectation and one free parameter we call “predisposition”. The model captures the same apparent preference phenomena illustrated by Prospect Theory but unlike Prospect Theory accounts for individual heterogeneity in parameters, employs far fewer parameters than full prospect theory, and retains neurobiological plausibility as a causal model of the choice process. Additionally, our theory makes a series of novel predictions amenable to future testing and includes an alternative explanation for endowment effect..

Suggested Citation

  • Glimcher, Paul W. & Tymula, Agnieszka A., 2016. "Expected Subjective Value Theory (ESVT): A Representation of Decision Under Risk and Certainty," Working Papers 2016-08, University of Sydney, School of Economics, revised Jan 2017.
    • Handle: RePEc:syd:wpaper:2016-08
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    Cited by:

    1. Thomas Epper & Helga Fehr-Duda, 2012. "The missing link: unifying risk taking and time discounting," ECON - Working Papers 096, Department of Economics - University of Zurich, revised Oct 2018.
    2. Andrew Mah & Shannon S. Schiereck & Veronica Bossio & Christine M. Constantinople, 2023. "Distinct value computations support rapid sequential decisions," Nature Communications, Nature, vol. 14(1), pages 1-14, December.

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    More about this item

    Keywords

    Utility; decision-making; reference point; neuroeconomics;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D87 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Neuroeconomics

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