Money, Kisses, and Electric Shocks: On the Affective Psychology of Risk
Yuval Rottenstreich and Christopher Hsee challenge the view that the S-shaped probability weighting function of prospect theory reflects the psychophysics of chance. They propose an affective account built on two assumptions: preferences depend on the emotional reactions that possible outcomes evoke, and outcomes of the same monetary value can differ in how emotionally rich they are. The account predicts that weighting functions are more S-shaped for affect-rich outcomes, so people are more sensitive to moving away from impossibility and certainty and less sensitive to mid-range probability changes. In a test, an affect-poor prize was preferred to an affect-rich one under certainty, but the preference reversed at low probability. The authors conclude that the independence of probability and outcome assumed by expected utility theory and prospect theory may hold across monetary differences but not across affective ones.
Yuval Rottenstreich and Christopher Hsee challenge the view that the S-shaped probability weighting function of prospect theory reflects the psychophysics of chance. They propose an affective account built on two assumptions: preferences depend on the emotional reactions that possible outcomes evoke, and outcomes of the same monetary value can differ in how emotionally rich they are. The account predicts that weighting functions are more S-shaped for affect-rich outcomes, so people are more sensitive to moving away from impossibility and certainty and less sensitive to mid-range probability changes. In a test, an affect-poor prize was preferred to an affect-rich one under certainty, but the preference reversed at low probability. The authors conclude that the independence of probability and outcome assumed by expected utility theory and prospect theory may hold across monetary differences but not across affective ones.
Written from the abstract read 2026-10-22 via SSRN.
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doi:10.1111/1467-9280.00334. Read at the level of the abstract.