We present a new theory of decision under risk called third-generation prospect theory. A novel feature of our version of prospect theory is that, by allowing reference points to be uncertain, it is able to accommodate the phenomenon of preference reversal. While several previous theories of...

We present a new theory of decision under uncertainty: third-generation prospect theory (PT3). This retains the predictive power of previous versions of prospect theory, but extends that theory by allowing reference points to be uncertain while decision weights are specified in a rank-dependent...

We present a new theory of decision under risk called third-generation prospect theory. A novel feature of our version of prospect theory is that, by allowing reference points to be uncertain, it is able to accommodate the phenomenon of preference reversal. While several previous theories of...

Since the 1980s, there has been explosive growth in the use of experimental methods in economics, leading to exciting developments in economic theory and policy. Despite this, the status of experimental economics remains controversial. In Experimental Economics, the authors draw on their...

The discovered preference hypothesis appears to insulate expected utility theory (EU) from disconfirming experimental evidence. It asserts that individuals have coherent underlying preferences, which experiments may not reveal unless subjects have adequate opportunities and incentives to...

This paper reports experimental tests of two alternative explanations of how players use focal points to select equilibria in one-shot coordination games. Cognitive hierarchy theory explains coordination as the result of common beliefs about players’ pre-reflective inclinations towards the...

Previous studies suggest that two otherwise robust 'anomalies' – preference reversals and disparities between buying and selling valuations – are eroded when respondents participate in repeated markets. We report an experiment which investigates whether this is true when factors...