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Replicating patterns of prospect theory for decision under risk

Abstract

Prospect theory is among the most influential frameworks in behavioural science, specifically in research on decision-making under risk. Kahneman and Tversky’s 1979 study tested financial choices under risk, concluding that such judgements deviate significantly from the assumptions of expected utility theory, which had remarkable impacts on science, policy and industry. Though substantial evidence supports prospect theory, many presumed canonical theories have drawn scrutiny for recent replication failures. In response, we directly test the original methods in a multinational study (n = 4,098 participants, 19 countries, 13 languages), adjusting only for current and local currencies while requiring all participants to respond to all items. The results replicated for 94% of items, with some attenuation. Twelve of 13 theoretical contrasts replicated, with 100% replication in some countries. Heterogeneity between countries and intra-individual variation highlight meaningful avenues for future theorizing and applications. We conclude that the empirical foundations for prospect theory replicate beyond any reasonable thresholds.

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Fig. 1: Effect sizes by item.
Fig. 2: Item replication rates by country.
Fig. 3: Effect sizes by contrast.
Fig. 4: Contrast pair replication rates by country.
Fig. 5: Choices congruent with prospect theory.

Data availability

All data are available with the preregistered material and code at osf.io/esxc4/.

Code availability

All code is available with the preregistered material and data at osf.io/esxc4/.

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Acknowledgements

We thank a number of colleagues and peers, including K. Kastelic, I. Sakelariev, T. Varkonyi, A. Víg, C. Saponaro, M. Frías and S. Deakin. We also thank Corpus Christi College Cambridge for support in hosting numerous researchers contributing to the study. We especially thank all team members from the Junior Researcher Programme. The authors received no specific funding for this work.

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Contributions

K.R. is the lead author and researcher responsible for all aspects of the manuscript. T.F. is a co-lead with primary responsibility for data management, analyses and visualization. S.A., M.L.B., G.B., L.D.B., A.C.-B., C.D., E.D., C.E.-S., M.F., S.P.G., H.J., R.K., P.R.K., J.K., T.L.A., I.S.L., L.M., A.E.N., J.P., S.K.Q., C.R., F.L.T., N.T., C.V.R., B.V., K.W. and A.Y. were part of the country-specific research teams who were responsible for data collection within each country, as well as country-specific supplementary details and general support of the writing. F.P., E.R. and S.v.d.L. were senior advisors on the study and provided input on the methods, analyses, writing and revisions.

Corresponding authors

Correspondence to Kai Ruggeri or Tomas Folke.

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The authors declare no competing interests.

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Peer review information Primary handling editor: Aisha Bradshaw.

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Extended data

Extended Data Fig. 1 Choices by Gender.

This figure captures the proportion of times participants chose option A as a function of their gender. Error-bars are bootstrapped 95% confidence intervals that respect the hierarchical structure of the data. There are clear gender differences for some items, but no general pattern. As this is the demographic variable with the most differences between groups, it is a meaningful indication of general consistency across the sample (that is, all other demographic indicators were even more similar).

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Ruggeri, K., Alí, S., Berge, M.L. et al. Replicating patterns of prospect theory for decision under risk. Nat Hum Behav 4, 622–633 (2020). https://doi.org/10.1038/s41562-020-0886-x

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