Dymanic Prospect Theory

Researchers from the University of Tsukuba, Japan have developed and validated a model (“dynamic prospect theory”) that integrates the most popular model in behavioral economics to describe decision-making under uncertainty—prospect theory, and a well-established model of learning from neuroscience—reinforcement learning theory.

This model more accurately described the decisions that people (and monkeys) made while facing risk than prospect theory or reinforcement learning theory alone, and revealed a systematic violation of prospect theory’s assumption that probability weighting is static.