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Tests of Cumulative Prospect Theory with graphical displays of probability

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Author(s): Michael H. Birnbaum | Kathleen Johnson | Jay-Lee Longbottom

Journal: Judgment and Decision Making
ISSN 1930-2975

Volume: 3;
Issue: 7;
Start page: 528;
Date: 2008;
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Keywords: Cumulative Prospect Theory | TAX model | priority heuristic | graphical format | branch independence | cancellation | combination | choice | uncertainty.

ABSTRACT
Recent research reported evidence that contradicts cumulative prospect theory and the priority heuristic. The same body of research also violates two editing principles of original prospect theory: cancellation (the principle that people delete any attribute that is the same in both alternatives before deciding between them) and combination (the principle that people combine branches leading to the same consequence by adding their probabilities). This study was designed to replicate previous results and to test whether the violations of cumulative prospect theory might be eliminated or reduced by using formats for presentation of risky gambles in which cancellation and combination could be facilitated visually. Contrary to the idea that decision behavior contradicting cumulative prospect theory and the priority heuristic would be altered by use of these formats, however, data with two new graphical formats as well as fresh replication data continued to show the patterns of evidence that violate cumulative prospect theory, the priority heuristic, and the editing principles of combination and cancellation. Systematic violations of restricted branch independence also contradicted predictions of ``stripped'' prospect theory (subjectively weighted additive utility without the editing rules).
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