The Data of Levy and Levy (2002), "Prospect Theory: Much Ado about Nothing?" Actually Support Prospect Theory

P.P. Wakker*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

Levy and-Levy (Management Science 2002) p resent data that, according to their claims, violate prospect theory. They suggest that prospect theory's hypothesis of an S-shaped value function, concave for gains and convex for losses, is incorrect. However, all the data of Levy and Levy are perfectly consistent with the predictions of prospect theory, as can be verified by simply applying prospect theory formulas. The mistake of Levy and Levy is that they, incorrectly, thought that probability weighting could be ignored.
Original languageEnglish
Pages (from-to)979-981
JournalManagement Science
Volume49
DOIs
Publication statusPublished - 1 Jan 2003

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