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International relations theorists have tried to adapt prospect theory to make it relevant to the study of real‐world decision‐making and testable beyond the constraints of the laboratory. Three experiments with undergraduate samples were conducted in an effort to clarify the advantages and limitations of prospect theory as adapted to explain political behavior. The first experiment tested hypotheses regarding the impact of prospect framing on group polarization, but these were only weakly supported. The second and third experiments examined alternative adaptations of the concept of framing; the results suggest that the political science expansion of the concept of framing may, under certain conditions, produce clear and robust preference reversals.

Although many decisions involve a stream of payoffs over time, political scientists have given little attention to how actors make the required tradeoffs between present and future payoffs, other than applying the standard exponential discounting model from economics. After summarizing the basic discounting model, we identify some of its leading behavioral anomalies—declining discount rates; preference reversals; higher discount rates for smaller payoffs than for larger payoffs and for gains than for losses; framing effects based on expectations; and a preference for ascending rather than descending sequences. We examine the leading alternative models of discounting and then apply a quasi-hyperbolic discount model to the problem of cooperation in iterated Prisoner's Dilemma games. We demonstrate that if actors display the widely observed tendency to highly discount the immediate future, then cooperation in an iterated Prisoner's Dilemma game is more difficult than Axelrod suggests.

Abstract
This paper develops an axiomatic context-dependent model of social image concerns. Allowing for context-dependence based on choice sets, it examines how context-dependence impacts social image concerns, in particular how a decision maker exhibits various social emotions stemming from their intrinsic reference point, which may not be captured by conforming to social norms. To elicit the intrinsic reference point, this paper provides weaker versions of Strategic Rationality and Independence, in addition to the basic axioms, to characterize the model of the Reference-Dependent Image-Conscious utilitarian. This paper also examines how social emotions stemming from the intrinsic reference point are related to preference reversals as violations of the Weak Axiom of Revealed Preference (WARP). Finally, this paper considers the relationship between social image concerns and intrinsic reciprocity. The findings demonstrate that social image plays a large role and the model developed illustrates a condition in which cooperation is sustained in prisoner's dilemma games.

AbstractThe Asian disease problem (ADP), as a demonstration of the framing effect, revealed a preference reversal between options perceived as risky and those perceived as certain. This research identifies individuals' involvement level as a moderator of the framing effect. The framing effect in the ADP consisted of emotional choice outcomes regarding human lives. Two studies in this paper demonstrate that when based on emotional choices, the framing effect in high involvement conditions increases in size. Interestingly, this influence of involvement reverses when the framing effect is based on rational choices. The studies reveal that the negativity invoked by the certain loss option is instrumental in the underlying mechanism of the risky choice framing effect, such as that demonstrated by the ADP. Copyright © 2014 ASAC. Published by John Wiley & Sons, Ltd.

It is well documented that the way a static choice task is "framed" can dramatically alter choice behavior, often leading to observable preference reversals. This framing effect appears to result from perceived changes in the nature or location of a person's initial reference point, but it is not clear how framing effects might generalize to performance on dynamic decision making tasks that are characterized by high workload, time constraints, risk, or stress. A study was conducted to examine the hypothesis that framing can introduce affective components to the decision making process and can influence, either favorably (positive frame) or adversely (negative frame), the implementation and use of decision making strategies in dynamic high-workload environments. Results indicated that negative frame participants were significantly impaired in developing and employing a simple optimal decision strategy relative to a positive frame group. Discussion focuses on implications of these results for models of dynamic decision making.

Over the past two decades, a decline in birth rates in advanced industrialized societies to levels well below those required for population replacement has been accompanied by a major change in the cross-national incidence of fertility. This has, in turn, given rise to a massive transformation in traditional cross-national patterns of relationships between fertility and other variables. Whereas previously the countries with the highest period fertility rates were those in which family-oriented cultural traditions were most pronounced and in which women's labour market participation was least, these relationships are now wholly reversed. This study uses data for 21 OECD countries to provide a more thorough and systematic mapping of the linkages between fertility, cultural values, economic structure and social policy than has hitherto been attempted in the literature, while simultaneously addressing some of the theoretical and methodological issues that arise in explaining a reversal of this magnitude. It argues that seemingly anomalous linkages with cultural traditions and employment structure are consequences of women's changing work and family preferences and of cross-national differences in the adoption of family-friendly public policy.

AbstractThe literature suggests that probability weighting and choice set dependence influence risky choices. However, their relative importance remains an open question. We present a joint test that uses binary choices between lotteries provoking Common Consequence and Common Ratio Allais Paradoxes and manipulates their joint payoff distribution. We show non-parametrically that probability weighting and choice set dependence both play a role at describing aggregate choices. To parsimoniously account for heterogeneity, we also estimate a structural model using a finite mixture approach. The model uncovers substantial heterogeneity and classifies subjects into three types: 38% Prospect Theory types whose choices are predominantly driven by probability weighting, 34% Salience Theory types whose choices are predominantly driven by choice set dependence, and 28% Expected Utility Theory types. The model predicts type-specific differences in the frequency of preference reversals out-of-sample, i.e., in choices with a different context than the ones used for estimating the model. Moreover, the out-of-sample predictions indicate that the choice context shapes the influence of choice set dependence.

PurposeThe purpose of this paper is to investigate the rationality of the decision making of residential developers in Thailand. Exploring its implications in the residential development field, the researchers propose the famous prospect theory as the primary cause of developers' incompetent decisions during the pre-development stage of residential development.Design/methodology/approachThe methodologies used in this research include literature review, expert interview, and experimental questionnaire.FindingsThe results show that Thai developers exhibit all five aspects of prospect theory: loss aversion, fourfold pattern, bias from rare events, mental accounting, and preference reversals (PR); however, in contrast to previous literature, the researchers found that Thai developers always choose to receive gains, and usually make risky choices to avoid losses, even if the risk of loss is low. Moreover, status quo bias has a low influence on Thai developers: they tend to become attached to the areas they develop, but remain flexible in selecting a project type that fits the land. In addition, PR and the framing effect affect only some groups of developers.Practical implicationsThis research provides awareness to professionals in the residential development field to make sound judgements, using Thailand as a case study.Originality/valueThis paper reveals the existence of the unproven prospect theory in the residential development field using an empirical study in Thailand as a case study.

Decision‐makers (DMs) often exhibit preference reversal and phase transitions in their states of confidence. We show how those behaviors induce chaos in a large system of DMs with heterogeneous beliefs. We construct a behavioral matrix operator [from a DM's probability weighting function (PWF)] that characterizes a projective mapping of confidence in dual psychological spaces. Moreover, we prove that in a seemingly stable system of DMs, the empirical Lyapunov exponent process for the noisy orbit of DM deterministic PWFs admits tail event chaos controlled by risk attitude factors. We use reported results from rank‐dependent Standard & Poor's 500 index option prices and Chicago Board Options Exchange Volatility Index to illustrate our theory. Data show phase transitions in the state of DM confidence over time as PWFs change from skew S‐shape to inverted S‐shape. Our model identifies an instability criterion function for the distribution of critical values of risk attitude factors over a convex set of probabilities bounded from above by the fixed‐point probability for PWFs. In particular, we use the criterion function to estimate critical values for risk attitude factors in index option price data that predict market crash based on the orientation of the PWF implied by option data. Copyright © 2014 John Wiley & Sons, Ltd.

Risk‐information framing can be a powerful tool for aiding the communication of risk and improving decision making. However, little work has investigated the extent that these framing effects depend on the characteristics of the perceiver. In our study, we examine whether the effects of different risk‐pricing formats on risky choices are the same for all individuals, no matter their domain experience or cultural background, or whether there are interactions between these factors. Survey 1 revealed that three risk‐pricing formats of the same choice problem resulted in the same individuals making different risky choices (preference reversal), suggesting that risk perception was distorted by the risk‐pricing format manipulation. In Survey 2, the effects of the risk‐pricing formats were shown to differ by the participants' cultural background (Asian vs. European) and the extent of their domain experience. The fact that there were no differences between the cultural or domain experience groups in their overall tendency to select riskier (cf. safer) choices indicates that risk behavior differences between groups are often closely linked to perceptual, rather than simply attitudinal, cognitive processes. The results demonstrate the complex, interactive cognitive processes that are used to encode risk information, involving the framing of the information and the cultural background and previous experiences of the individual. We conclude that it is important to consider the characteristics of the individual (e.g., culture, domain experience, etc.) when manipulating risk‐information framing with the aim of improving risk communication.

Using survey data from Bolivian trial courts, we explore the relationship between judicial decisions, career goals, & hierarchical pressures in continental legal systems. Based on a principal-agent approach, we hypothesize that inferior court judges are more likely to defer to superior courts when they share their interpretation of the law, when they anticipate reversals, & when they fear political manipulation of judicial careers. In turn, superior judges are likely to exercise informal pressures over inferior court judges who deviate from the former's legal views & do not anticipate their preferences. The conclusions emphasize the utility of survey research for the study of strategic compliance in judicial institutions. Tables, Figures, References. Adapted from the source document.

We leverage the institutional features of American courts to evaluate the importance of whistleblowers in hierarchical oversight. Drawing on a formal theory of signaling in the judicial hierarchy, we examine the role of whistleblowing dissents in triggering en banc review of three‐judge panels by full circuits of the Courts of Appeals. The theory generates predictions about how dissent interacts with judicial preferences to influence circuits' review and reversal decisions, which we test using original and existing data. First, we show that judges who dissent counter to their preferences are more likely to see their dissents lead to review and reversal. Second, we show that dissents are most influential when the likelihood of non‐compliance by a three‐judge panel is highest. Our results underscore the importance of dissent in the judicial hierarchy and illustrate how judicial whistleblowers can help appellate courts target the most important cases for review.

AbstractMany classic social preference (multiwinner social choice) correspondences are resolute only when two alternatives and an odd number of individuals are considered. Thus, they generally admit several resolute refinements, each of them naturally interpreted as a tie-breaking rule. A tie-breaking rule is compulsory every time a single final decision is needed. Unfortunately, using a tie-breaking rule on some social preference (multiwinner social choice) correspondence can dramatically compromise its properties. In particular, very often, the arithmetic relation between the number of alternatives and the number of voters does not allow to maintain both anonymity and neutrality. In those cases, the only possibility is to look at suitable different forms of symmetry that are coherent with the decision context. We find out conditions which make a social preference (multiwinner social choice) correspondence admit a resolute refinement fulfilling some weak versions of the anonymity and neutrality principles. We also clear when it is possible to obtain, for those resolute refinements, the reversal symmetry (immunity to the reversal bias). The theory we develop turns out to be useful in many common applicative contexts and allows to explicitly construct those refinements.