Risk and rationality: The effects of mood and decision rules on probability weighting

Journal of Economic Behavior and Organization

Volumn 78, Issue 1-2, 2011, Pages 14-24

  Fehr Duda, Helga ^a   Epper, Thomas ^a   Bruhin, Adrian ^a   Schubert, Renate ^a  

^a ETH ZURICH   (Switzerland)

Author keywords

Gender differences; Incidental emotions; Probability weighting function; Rationality; Risk taking behavior

Indexed keywords

EID: 79954628294     PISSN: 01672681     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.jebo.2010.12.004     Document Type: Article

References (47)

1. Abdellaoui, M., Baillon, A., Placido, L., Wakker, P.P. The rich domain of uncertainty: source functions and their experimental implementation. American Economic Review, in press.
2. Barberis N., Huang M., Santos T. Prospect theory and asset prices. Quarterly Journal of Economics 2001, 116:1-53.
3. Bell D. Regret in decision making under uncertainty. Operations Research 1982, 20:961-981.
4. Borghans L., Goldsteyn B.H.H., Heckman J.J., Meijers H. Gender differences in risk aversion and ambiguity aversion. Journal of the European Economic Association 2009, 7:652-661.
5. Bruhin A., Fehr-Duda H., Epper T. Risk and rationality: uncovering heterogeneity in probability distortion. Econometrica 2010, 78:1375-1412.
6. Byrnes J.P., Miller D.C., Schafer W.D. Gender differences in risk taking: a meta-analysis. Psychological Bulletin 1999, 125:367-383.
7. Capra M. Mood-driven behavior in strategic interactions. American Economic Review Papers and Proceedings 94 2004, 367-372.
8. Capra M., Lanier K., Meer S. The effects of induced mood on bidding in random n th-price auctions. Journal of Economic Behavior and Organization 2010, 75:223-234.
9. Eckel C.C., Grossman P.J. Differences in the economic decisions of men and women: experimental evidence. Handbook of Experimental Economics Results, vol. I 2005, 509-519. Elsevier, New York. C. Plott, V. Smith (Eds.).
10. Efron B. Bootstrap methods: another look at the jackknife. Annals of Statistics 1979, 7:1-26.
11. Fehr-Duda H., De Gennaro M., Schubert R. Gender, financial risk, and probability weights. Theory and Decision 2006, 60:283-313.
12. Fehr-Duda H., Bruhin A., Epper T. Rationality on the rise: why relative risk aversion increases with stake size. Journal of Risk and Uncertainty 2010, 40:147-180.
13. Fischbacher U. z-Tree: Zurich toolbox for ready-made economic experiments. Experimental Economics 2007, 10:171-178.
14. Gertner R. Game shows and economic behavior: risk taking on card sharks. Quarterly Journal of Economics 1993, 108:507-521.
15. Gneezy U., Kapteyn A., Potters A. Evaluation periods and asset prices in a market experiment. Journal of Finance 2003, 58:821-837.
16. Goldstein W.M., Einhorn H.J. Expression theory and the preference reversal phenomena. Psychological Review 1987, 94:236-254.
17. Gonzalez R., Wu G. On the shape of the probability weighting function. Cognitive Psychology 1999, 38:129-166.
18. Gul F. A theory of disappointment in decision making under uncertainty. Econometrica 1991, 59:667-686.
19. Hey J.D., Orme C. Investigating generalizations of expected utility theory using experimental data. Econometrica 1994, 62:1291-1326.
20. Isen A.M., Labroo A.A. Some ways in which positive affect facilitates decision making and judgment. Emerging Perspectives on Judgment and Decision Research 2003, 365-392. Cambridge University Press, New York. S.L. Schneider, J. Shanteau (Eds.).
21. Isen A.M., Patrick R. The effect of positive feeling on risk-taking: when the chips are down. Organizational Behavior and Human Performance 1983, 31:194-202.
22. Johnson E.J., Tversky A. Affect, generalization, and the perception of risk. Journal of Personality and Social Psychology 1983, 45:20-31.
23. Kahneman D., Tversky A. Prospect theory: an analysis of decision under risk. Econometrica 1979, 47:263-291.
24. Kirchsteiger G., Rigotti L., Rustichini A. Your morals might be your moods. Journal of Economic Behavior and Organization 2006, 59:155-172.
25. Kliger D., Levy O. Mood-induced variation in risk preferences. Journal of Economic Behavior and Organization 2003, 52:573-584.
26. Kliger D., Levy O. Mood impacts on probability weighting functions: large-gamble evidence. Journal of Socio-Economics 2008, 37:1397-1411.
27. Köbberling V., Wakker P. An index of loss aversion. Journal of Economic Theory 2005, 122:119-131.
28. Lattimore P.K., Baker J.K., Witte A.D. The influence of probability on risky choice: a parametric examination. Journal of Economic Behavior and Organization 1992, 17:377-400.
29. Loewenstein G., Lerner J.S. The role of affect in decision making. Handbook of Affective Sciences 2003, 619-642. Oxford University Press, Oxford. R.J. Davidson, K.R. Scherer, H.H. Goldsmith (Eds.).
30. Loomes G., Sugden R. Disappointment and dynamic consistency in choice under uncertainty. Review of Economic Studies 1986, 53:271-282.
31. Mukherjee, K., (2010). Thinking styles and risky decision-making: further exploration of the affect-probability weighting link. Journal of Behavioral Decision Making, DOI: 10.1002/bdm.700.
32. Neilson W.S. Reference wealth effects in sequential choice. Journal of Risk and Uncertainty 1998, 17:27-47.
33. Parkinson B., Totterdell P., Briner R.B., Reynolds S. Changing Moods: The Psychology of Mood and Mood Regulation 1996, Addison Wesley Longman, Harlow.
34. Pham M.T. Emotion and rationality: a critical review and interpretation of empirical evidence. Review of General Psychology 2007, 11:155-178.
35. Prelec D. The probability weighting function. Econometrica 1998, 66:497-527.
36. Quiggin J. A theory of anticipated utility. Journal of Economic Behavior and Organization 1982, 3:323-343.
37. Rottenstreich Y., Hsee C.K. Money, kisses and electric shocks: on the affective psychology of risk. Psychological Science 2001, 12:185-190.
38. Starmer C. Developments in non-expected utility theory: the hunt for a descriptive theory of choice under risk. Journal of Economic Literature 2000, 38:332-382.
39. Thaler R.H., Johnson E.J. Gambling with the house money and trying to break even: the effects of prior outcomes on risky choice. Management Science 1990, 36:643-660.
40. Tversky A., Kahneman D. Advances in prospect theory: cumulative representation of uncertainty. Journal of Risk and Uncertainty 1992, 5:297-323.
41. Tversky A., Wakker P. Risk attitudes and decision weights. Econometrica 1995, 63:1255-1280.
42. Walther H. Normal-randomness expected utility, time preference, and emotional distortions. Journal of Economic Behavior and Organization 2003, 52:253-266.
43. Weber M., Zuchel H. How do prior outcomes affect risk attitude?. Decision Analysis 2005, 2:30-43.
44. Westermann R., Spies K., Stahl G., Hesse F. Relative effectiveness and validity of mood induction procedures: a meta-analysis. European Journal of Social Psychology 1996, 26:557-580.
45. Wright W.F., Bower G.H. Mood effects on subjective probability assessment. Organizational Behavior and Human Decision Processes 1992, 52:276-291.
46. Wu G. Anxiety and decision making with delayed resolution of uncertainty. Theory and Decision 1999, 46:159-198.
47. Wu G., Zhang J., Gonzalez R. Decision under risk. Blackwell Handbook of Judgment and Decision Making 2004, 399-423. Oxford University Press, Oxford. N. Harvey, D. Koehler (Eds.).