Two recently published studies argue that conventional parameterizations of cumulative prospect theory (CPT) fail to resolve the St. Petersburg Paradox. Yet as a descriptive theory CPT is not intended to account for the local representativeness effect, which is known to induce 'alternation bias'...

The St. Petersburg paradox is one of the oldest challenges of expected value theory. Thus far, explanations of the paradox aim at small probabilities being perceived as zero and the boundedness of utility of the outcome. This paper provides experimental results showing that neither diminishing...

This experimental study investigates the interaction of two influential factors of biased probability judgments. Results provide new insights on the preconditions for an application of either the gambler’s fallacy or its exact opponent, the hot hand fallacy. The first factor is cognitive...

We examine generational differences in risk-taking behavior by means of a laboratory experiment with monetary incentives. We estimate the parameterized models in the framework of cumulative prospect theory and examine the risk aversion, probability weightings and reference point adoption of...

This paper examines Chinese students’ risk attitude using buying and selling experiments with lotteries. We found that subjects were more risk averse in the buying experiment than in the selling experiment, suggesting the endowment effect. In the selling experiment, subjects were risk loving...

The literature on social preferences provides overwhelming evidence of departures from pure self-interest of individuals. Experiments show that people care about others' well-being and their relative standing. This paper investigates whether this type of behavior persists when risk comes into...

This paper presents the results of an experiment that completely measures the utility function and probability weighting function for different positive and negative monetary outcomes, using a representative sample of N = 1935 from the general public. The results confirm earlier findings in the...