Title: Probability Distortion in Multi-Attribute Decisions: From Risk to Ambiguity
Abstract: Transport users face complex decisions. Not only the consequences of their decisions are uncertain, but they generally involve several attributes, such as time and money. Time-money tradeoffs have been intensively studied in transport economics, and a growing attention is now paid to users' attitudes towards uncertainty related to transport decisions. The present paper makes two contributions to the transportation literature: one theoretical and the other experimental. First, the authors propose a fast and tractable method for measuring prospect theory parameters capturing attitudes towards probabilities (decision weighting function) and attitudes towards losses (loss aversion parameter). The elicitation method does not involve the value function and is particularly suitable in complex multi-attribute decisions were the shape of the value function is unknown. Second, the authors present the results of an experiment that uses the proposed elicitation method to measure, at individual level, probability distortion in decisions involving both time and money consequences in two contexts: risk (where probabilities are given) and ambiguity (where the probability distribution is unknown). An original experimental setup that exposes subjects to real gains and losses for money and time is built for the purpose. Inverse S-shaped probability weighting and loss aversion is observed for risk, and probability distortion is more pronounced in ambiguity.
Publication Year: 2013
Publication Date: 2013-01-01
Language: en
Type: article
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