Probability Weighting Functions Derived from Hyperbolic Time Discounting: Psychophysical Models and Their Individual Level Testing

Kazuhisa Takemura*, Hajime Murakami

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

6 Citations (Scopus)

Abstract

A probability weighting function (w(p)) is considered to be a nonlinear function of probability (p) in behavioral decision theory. This study proposes a psychophysical model of probability weighting functions derived from a hyperbolic time discounting model and a geometric distribution. The aim of the study is to show probability weighting functions from the point of view of waiting time for a decision maker. Since the expected value of a geometrically distributed random variable X is 1/p, we formulized the probability weighting function of the expected value model for hyperbolic time discounting as w(p) = (1 − k log p)−1. Moreover, the probability weighting function is derived from Loewenstein and Prelec's (1992) generalized hyperbolic time discounting model. The latter model is proved to be equivalent to the hyperbolic-logarithmic weighting function considered by Prelec (1998) and Luce (2001). In this study, we derive a model from the generalized hyperbolic time discounting model assuming Fechner's (1860) psychophysical law of time and a geometric distribution of trials. In addition, we develop median models of hyperbolic time discounting and generalized hyperbolic time discounting. To illustrate the fitness of each model, a psychological experiment was conducted to assess the probability weighting and value functions at the level of the individual participant. The participants were 50 university students. The results of individual analysis indicated that the expected value model of generalized hyperbolic discounting fitted better than previous probability weighting decision-making models. The theoretical implications of this finding are discussed.

Original languageEnglish
Article number778
JournalFrontiers in Psychology
Volume7
DOIs
Publication statusPublished - 2016 May 26

Keywords

  • decision under risk
  • hyperbolic discounting
  • probability judgment
  • probability weighting function
  • prospect theory

ASJC Scopus subject areas

  • General Psychology

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