1. Web-Based Program of Research on Risky Decision Making Michael H. Birnbaum California State University, Fullerton

2. 1967

4. Web-Based Research Series of Studies tests classical and new paradoxes in decision making. People come on-line via WWW (some in lab). Choose between gambles; 1 person per month (about 1% of participants) wins the prize of one of their chosen gambles. Data arrive 24-7; sample sizes are large; results are clear.

5. Cumulative Prospect Theory/ Rank-Dependent Utility (RDU)

6. Cumulative Prospect Theory/ RDU Tversky & Kahneman (1992) CPT is more general than EU or (1979) PT, accounts for risk-seeking, risk aversion, sales and purchase of gambles & insurance. Accounts for Allais Paradoxes, chief evidence against EU theory. Accounts for certain violations of restricted branch independence. Nobel Prize in Economics (2002)

7. RAM/TAX Models

8. RAM Model Parameters

9. RAM implies inverse- S

10. Decision Theories and Allais Paradox Branch Independence CoalescingSatisfiedViolated SatisfiedEU, CPT* OPT* RDU, CPT* ViolatedSWU, OPT*RAM, TAX

11. Case against CPT/RDU Violations of Stochastic Dominance Violations of Coalescing (Event-Splitting) Violations of 3-Upper Tail Independence Violations of Lower Cumulative Independence Violations of Upper Cumulative Independence

12. More Evidence against CPT/RDU/RSDU Violations of Restricted Branch Independence are opposite predictions of inverse-S weighting function needed to explain the Allais Paradoxes. Violations of distribution independence favor RAM over TAX and also opposite of predictions of CPT with inverse-S.

13. For More Information: http://psych.fullerton.edu/mbirnbaum/ Download recent papers from this site. Follow links to “brief vita” and then to “in press” for recent papers. mbirnbaum@fullerton.edu