Bibliogr. p 461-491. Index

Prospect Theory: For Risk and Ambiguity provides the first comprehensive and accessible textbook treatment of the way decisions are made both when we have the statistical probabilities associated with uncertain future events (risk) and when we lack them (ambiguity). The book presents models, primarily prospect theory, that are both tractable and psychologically realistic.

Introduction Part I. Expected utility 1. The general model of decision under uncertainty and no-arbitrage (expected utility with known utilities and unknown probabilities) 2. Expected utilities with known probabilities - "risk" - and unknown utilities 3. Applications of expected utility for risk 4. Expected utility with unknown probabilities abd unknown utilities Part II. Nonexpected utility for risk 5. Heuristic arguments for probabilistic sensitivity and rank dependence 6. Probabilistic sensitivity and rank dependence analyzed 7. Applications and extensions of rank dependence 8. Where prospect theory deviates from rank-dependent utility and expected utility : reference dependence versus asset integration 9. Prospect theory for decision under risk Part III. Nonexpected utility for uncertainty 10. Extending rank-dependent utility from risk to uncertainty 11. Ambiguity : where uncertainty extends beyond risk 12. Prospect theory for uncertainty 13. Conclusion