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Meta-Analysis of Prospect Theory Parameters

Author

Listed:
  • Taisuke Imai
  • Salvatore Nunnari
  • Jilong Wu
  • Ferdinand M. Vieider

Abstract

We present a meta-analysis of prospect theory (PT ) parameters, summarizing data from 166 papers reporting 812 estimates. These parameters capture risk-taking propensities, thus holding interest beyond PT. We develop an inverse-variance weighted method that accounts for correlations in PT parameters and imputes missing information on standard errors. The mean patterns align with the stylized facts of diminishing sensitivity towards outcomes and probabilities discussed in PT. Beyond this, the analysis yields several new insights: 1) between-study variation in parameters is vast; 2) heterogeneity is difficult to explain with observable study characteristics; and 3) the strongest predictors are experimental and measurement indicators, revealing systematic violations of procedure invariance. These findings highlight the promise of cognitive accounts of behavior in organizing unexplained variation in risk-taking, which we discuss.

Suggested Citation

  • Taisuke Imai & Salvatore Nunnari & Jilong Wu & Ferdinand M. Vieider, 2025. "Meta-Analysis of Prospect Theory Parameters," CESifo Working Paper Series 12334, CESifo.
    • Handle: RePEc:ces:ceswps:_12334
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    References listed on IDEAS

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    1. Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
    2. Stefan Zeisberger & Dennis Vrecko & Thomas Langer, 2012. "Measuring the time stability of Prospect Theory preferences," Theory and Decision, Springer, vol. 72(3), pages 359-386, March.
    3. Arthur J. Robson, 2001. "Why Would Nature Give Individuals Utility Functions?," Journal of Political Economy, University of Chicago Press, vol. 109(4), pages 900-929, August.
    4. Kobberling, Veronika & Wakker, Peter P., 2005. "An index of loss aversion," Journal of Economic Theory, Elsevier, vol. 122(1), pages 119-131, May.
    5. Ranoua Bouchouicha & Ferdinand M. Vieider, 2017. "Accommodating stake effects under prospect theory," Journal of Risk and Uncertainty, Springer, vol. 55(1), pages 1-28, August.
    6. Paul J. H. Schoemaker, 1990. "Are Risk-Attitudes Related Across Domains and Response Modes?," Management Science, INFORMS, vol. 36(12), pages 1451-1463, December.
    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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