The Role of Payoff Ratio in Decision Making Under Uncertainty

Expected value, expected utility, and prospect theory assume additive integration of expected gains and losses (gain – loss). We document people’s pervasive tendency to integrate expected outcomes in a multiplicative way (gain/loss). Reliance on the payoff ratio predicts risk aversion (seeking) for mixed gambles with a positive (negative) expected value.



Citation:

Bart de Langhe and Stefano Puntoni (2012) ,"The Role of Payoff Ratio in Decision Making Under Uncertainty", in NA - Advances in Consumer Research Volume 40, eds. Zeynep Gürhan-Canli, Cele Otnes, and Rui (Juliet) Zhu, Duluth, MN : Association for Consumer Research, Pages: 284-287.

Authors

Bart de Langhe, University of Colorado at Boulder, USA
Stefano Puntoni, Erasmus University Rotterdam, The Netherlands



Volume

NA - Advances in Consumer Research Volume 40 | 2012



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