Do Military decision makers behave as predicted by prospect theory?

Abstract (Thorvald Haerem , Bard Kuvaas , Bjorn T. Bakken , Tone Karlsen )

Four experiments were conducted to explore the robustness of risky choice framing among military decision makers. In the first experiment the original version of the Asian disease problem was administered. In contrast to Tversky and Kahneman’s ([1981]) original findings, military decision makers were not influenced by the gain and loss framing. They demonstrated risk-seeking behavior in both domains. In the second experiment, we administered a military version of the Asian disease problem. We found a significant framing effect, but it was unidirectional: The decision makers were risk seeking in both domains, but significantly more risk seeking in the loss domain. To explore the strength of this risk-seeking preference, we altered the problem in a third experiment, making the risky alternative 12.5% less attractive than the certain one. Again, we found risk-seeking behavior in both domains. Finally, we explored reasons for these deviations from prospect theory by comparing the responses of business students and military officers. In this analysis, we observed significantly higher levels of self-efficacy in the military sample, as compared to the civil sample, and that the self-efficacy influenced risk seeking only in the military sample. In a post hoc analysis we also found that years of education reduced risk-seeking preference.

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24. May 2010 by Miguel Barbosa
Categories: Behavioral Economics, Curated Readings | Leave a comment

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