We demonstrate that in simple 2 X 2 games (cumulative) prospect theory preferences can be evolutionarily stable, i.e. a population of players with prospect theory preferences can not be invaded by more rational players. This holds also if probability weighting is applied to the probabilities of...

We demonstrate that in simple 2 X 2 games (cumulative) prospect theory preferences can be evolutionarily stable, i.e. a population of players with prospect theory preferences can not be invaded by more rational players. This holds also if probability weighting is applied to the probabilities of...

The paper first shows that financial market equilibria need not to exist if agents possess cumulative prospect theory preferences with piecewise-power value functions. This is due to the boundary behavior of the cumulative prospect theory value function, which might cause an infinite...

We study how the framework of classical game theory changes when the preferences of the players are described by Prospect Theory instead of Expected Utility Theory. Specifically, we study the influence of framing effect and probability weighting on the existence and specific structure of Nash...

Cultural differences in thought processes (i.e., holistic versus analytic thinking) have been suggested as an explanation for different susceptibility to framing effects. To test this, we conducted an experiment which investigates several framing problems and various measures of cognitive modes...

Stock market participation differs a lot across countries. Cultural dimensions could be a potential factor for that. We show that indeed uncertainty avoidance is linked to rates of stock market participation across countries. We can show even more that uncertainty avoidance has an indirect...

We present results from the first large-scale international survey on risk preferences, conducted in 45 countries. We show substantial cross-country differences in risk aversion, loss aversion and probability weighting. Moreover, risk attitudes in our sample depend not only on economic...

We observe that the standard variant of Prospect Theory cannot describe very risk-averse choices in simple lotteries. This makes it difficult to accommodate it with experimental data. Using an exponential value function can solve this problem and allows to cover the whole spectrum of risk-averse...

We examine time discounting factors in an international survey. Our analysis reveals a significant relationship between time discount factors and historical equity premiums across 27 countries. This result implies that higher historical equity risk premiums are observed in countries where survey...