Emmanuel Kemel

Eliciting Prospect Theory When Consequences Are Measured in Time Units: “Time Is Not Money”

We elicited the prospect theory components utility, probability weighting, and loss aversion when consequences are expressed as the time dedicated to a specific task or activity. A similar elicitation was performed for monetary consequences to allow an across-attribute time/money comparison of the elicited components at the individual level. We obtained less concave utility and smaller loss aversion for time than for money. Moreover, while the probability weighting was predominantly inverse S-shaped for both attributes, it was less sensitive to probabilities and more elevated for time than for money. This finding implies more optimism for gains and more pessimism for losses. This paper was accepted by Peter Wakker, decision analysis.

Deciding about human lives: an experimental measure of risk attitudes under prospect theory

For public policies in the health, security or safety domains, the main consequences concern the number of human lives that are saved or lost, and are uncertain ex-ante. In classic economic evaluations of such policies, losses and gains of human lives are often monetized and aggregated with other costs and benefits. Uncertainty about human lives is thus treated as uncertainty about monetary consequences. In this paper, we question whether people risk human lives as they risk money. We present an experiment comparing risk attitudes towards human lives and towards money under prospect theory. The results show that respondents treat the two attributes differently when losses are involved. Specifically, the decisions involving human lives are characterized by less elevated probability weighting in the loss domain and higher loss aversion compared to decisions involving money. These findings suggest that public preferences may differ from the cost-benefit analysis recommendations.