Barberis, Nicholas - In: Management Science 58 (2012) 1, pp. 35-51
We show that prospect theory offers a rich theory of casino gambling, one that captures several features of actual … gambling behavior. First, we demonstrate that for a wide range of preference parameter values, a prospect theory agent would be …. Second, we show that the probability weighting embedded in prospect theory leads to a plausible time inconsistency: at the …