Gains and losses in the eyes of the beholder: a comparative study of foreign policy decision making under risk

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Title: Gains and losses in the eyes of the beholder: a comparative study of foreign policy decision making under risk
Author: Yang, Yi
Abstract: Prospect theory is a descriptive model of individual decision -making under risk (Kahneman and Tversky 1979 ) . The central tenet of prospect theory posits that the risk orientation of decision -makers is affected by the gains vs . losses domains in which they are situated . Individuals are predicted to be risk -averse in the domain of gains and risk seeking in the domain of losses . Although prospect theory made significant contributions to decision theory , it has important limitations . Foremost , as noted by Levy (1997a ) , prospect theory is not a complete theory of decision -making . Like rational choice theory , prospect theory attempts to explain choices or outcomes , not the processes through which those choices come about (Abelson and Levi 1985 , 235 ) . In response to this limitation of prospect theory , this dissertation intends to address the following set of puzzles : Do gains vs . losses domains affect the decision processes in foreign policy decision making ? If so , in what way will decision strategies change ? That is , what strategies are most likely to be employed when the decision maker is in the domain of gains ? And , in contrast , what strategies are the most likely to be utilized when the decision maker is in the domain of losses ? To address these questions , I develop and extend prospect theory to account for the impact of gains vs . losses domains on decision strategy selections by decision makers under risk . A set of testable hypotheses are then derived . To render a robust test of these hypotheses , I employ a cross -national experimental research design , utilizing American subjects first and then replicating the same experiment with subjects in mainland China . In terms of research instrument , I utilize the computerized decision process tracer ? ? the Decision Board Platform . Specifically , the ? ?moves ? ? of decision makers are recorded by the Decision Board and then used to identify choices and to infer specific decision strategies . Statistical analysis of the experimental results demonstrates support for the major hypotheses . A decision maker in the domain of gains is more likely to employ a holistic , alternative -based , compensatory , and maximizing decision strategy than is a decision maker in the domain of losses .
URI: http : / /hdl .handle .net /1969 .1 /3078
Date: 2006-04-12

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Gains and losses in the eyes of the beholder: a comparative study of foreign policy decision making under risk. Available electronically from http : / /hdl .handle .net /1969 .1 /3078 .

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