Never, Ever Getting Started

Résumé du livre

Prospect theory is arguably the most prominent alternative to expected utility theory. We study the investment or gambling behavior of a prospect theory decision maker who is aware of his time-inconsistency but lacks commitment. For the empirically relevant prospect theory specifications, we obtain the extreme prediction that such a decision maker never gambles or invests in the stock market -- even if expected gains are arbitrarily high. When taken to dynamic settings, prospect theory needs to be modified if it is supposed to yield more realistic predictions.