Please use this identifier to cite or link to this item: http://hdl.handle.net/2381/44170
Title: A quantum-probabilistic paradigm: Non-consequential reasoning and state dependence in investment choice
Authors: Haven, Emmanuel
Khrennikova, Polina
First Published: 12-Apr-2018
Publisher: Elsevier
Citation: Journal of Mathematical Economics, 2018, 78, pp. 186-197
Abstract: Seminal findings involving payoffs (Shafir and Tversky, 1992; Tversky and Shafir, 1992; Shafir, 1994) showed that individuals exhibit state-dependent behaviour in different informational contexts. In particular, in the condition of ambiguity as well as risk, individuals tend to exhibit ambiguity aversion. The core principle of rational (consequential) behaviour conceived by Savage (1954), that is the ‘Savage Sure Thing’ principle, has been shown to be violated. In mathematical language, this violation is equivalent to the violation of the “Law of total probability” (Kolmogorov, 1933). Given the importance of original findings in the call for a generalization of classical expected utility, we perform in this paper a set of experiments related to expressing investment preferences: (i) under objective risk, (ii) after a preceding gain, or loss. In accordance with previous findings we detected state dependence in human judgement (previous gain or loss changed the preference state of the participants) as well as violation of consequential reasoning under risk. We propose a quantum probabilistic model of agents’ preferences, where non-consequentialism and state dependence can be well explained via interference of complex probability amplitudes. A geometric depiction of the experimental findings with a state reconstruction procedure from statistical data via the inverse Born's rule (1926), allows for an accurate representation of agents’ preference formation in risky investment choice.
DOI Link: 10.1016/j.jmateco.2018.04.003
ISSN: 0304-4068
eISSN: 1873-1538
Links: https://www.sciencedirect.com/science/article/pii/S0304406818300442?via%3Dihub
http://hdl.handle.net/2381/44170
Embargo on file until: 12-Oct-2019
Version: Post-print
Status: Peer-reviewed
Type: Journal Article
Rights: Copyright © Elsevier 2018. After an embargo period this version of the paper will be an open-access article distributed under the terms of the Creative Commons Attribution-Non Commercial-No Derivatives License (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made.
Description: The file associated with this record is under embargo until 18 months after publication, in accordance with the publisher's self-archiving policy. The full text may be available through the publisher links provided above.
Appears in Collections:Published Articles, School of Management

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