Empirical evaluation of four models of buying and selling prices of gambles

Judges assigned values to gambles from viewpoints of buyers (willingness to pay) and sellers (willingness to accept). Consistent with previous results, selling prices exceed buying prices, and these two judgments are not monotonically related to each other. There are systematic violations of consequence monotonicity when the consequence of zero is increased to a small positive value. Models based on loss aversion combined with cumulative prospect theory (CPT) do not give accurate accounts of the data. In particular, judgments violate complementary symmetry, which is implied by third-generation prospect theory. In addition, there are violations of first order stochastic dominance in judgments of three-branch gambles. Models based on the theory of joint receipts by R. D. Luce fit better than third-generation prospect theory, but the best-fitting of six such models does not give an adequate account of judgments involving a lowest consequence that might be zero or positive. Two configural weight models give better fits to the data using the same number or fewer parameters estimated from the data. (C) 2016 Elsevier Inc. All rights reserved.