Analysis of complex decision problems based on cumulative prospect theory

• Autorzy: Dudzińska-Baryła R.

Identyfikatory

DOI

10.5277/ord180301

• Języki publikacji: EN

Abstrakty

EN

Complex risky decision problems involve sequences of decisions and random events. The choice at a given stage depends on the decisions taken in the previous stages, as well as on the realizations of the random events that occurred earlier. In the analysis of such situations, decision trees are used, and the criterion for choosing the optimal decision is to maximize the expected monetary value. Unfortunately, this approach often does not reflect the actual choices of individual decision makers. In descriptive decision theory, the criterion of maximizing the expected monetary value is replaced by a subjective valuation that takes into account the relative outcomes and their probabilities. This paper presents a proposal to use the principles of cumulative prospect theory to analyse complex decision problems. The concept of a certainty equivalent is used to make it possible to compare risky and non-risky alternatives.

Słowa kluczowe

EN

cumulative prospect theory; complex decision problem; decision tree

• Wydawca: Oficyna Wydawnicza Politechniki Wrocławskiej
• Czasopismo: Operations Research and Decisions
• Rocznik: 2018
• Tom: Vol. 28, No. 3
• Strony: 5--16
• Opis fizyczny: Bibliogr. 12 poz., rys.

Twórcy

autor

Dudzińska-Baryła R.

• Department of Operations Research, University of Economics in Katowice, ul. 1 Maja 50, 40-287 Katowice, Poland

Bibliografia

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• [2] DUDZIŃSKA-BARYŁA R., Influence of a change in the reference point on the valuation of decisions based on prospect theory, [In:] J.B. Gajda, R. Jadczak (Eds.), Operations Research. Examples of Application, Wydawnictwo Uniwersytetu Łódzkiego, Łódź 2015, 43–56 (in Polish).
• [3] DUDZIŃSKA-BARYŁA R., KOPAŃSKA-BRÓDKA D., Maximum expected utility portfolios versus prospect theory approach, [In:] J. Hanclova (Ed.), Proceedings of the International Academic Conference on Increasing Competitiveness or Regional, National and International Markets, VSB-Technical University of Ostrava, Ostrava 2007 (available on CD).
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• [8] PRELEC D., The probability weighting function, Econometrica, 1998, 66 (3), 497–527.
• [9] STOTT H.P., Cumulative prospect theory’s functional menagerie, J. Risk Uncert., 2006, 32, 101–130.
• [10] TVERSKY A., KAHNEMAN D., Advances in prospect theory: cumulative representation of uncertainty, J. Risk Uncert., 1992, 5, 297–323.
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• [12] https://github.com/SilverDecisions/SilverDecisions/wiki/Gallery#city-promotion-decision-model (date of access: 02.11.2017)

Uwagi

Opracowanie rekordu w ramach umowy 509/P-DUN/2018 ze środków MNiSW przeznaczonych na działalność upowszechniającą naukę (2018).