A farmer’s uncertainty preferences can play a large role in how he makes production decisions on the farm. We attempt to understand how farmers’ household characteristics as well as past harvest shocks affect uncertainty preferences of maize farmers in southern Mexico. By using a series of...

We derive the optimal portfolio choice for an investor who behaves according to Cumulative Prospect Theory. The study is done in a one-period economy with one risk-free asset and one risky asset, and the reference point corresponds to the terminal wealth arising when the entire initial wealth is...

We assess alternative presentations of investment risk using a discrete choice experiment which asked subjects to rank three investment portfolios for retirement savings across nine risk presentation formats and four underlying risk levels. Using Prospective Theory utility specifications we...

This paper presents a new two-parameter probability weighting function for Tversky and Kahneman (1992) cumulative prospect theory as well as its special cases — Quiggin (1981) rank-dependent utility and Yaari (1987) dual model. The proposed probability weighting function can be inverse...

An experiment was conducted to explore whether loss aversion is altered when individuals are placed under a higher level of cognitive load. The coefficients of monetary loss aversion were measured for 30 participants under low and high cognitive load. Memorizations of differing spans of digits...

A sensitivity analysis of the impact of Cumulative Prospect Theory (CPT) parameters on a Mean/Risk efficient frontier is performed, through a simulation procedure, assuming a Multivariate Variance Gamma distribution for log-returns. The optimal investment problem for an agent with CPT...