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The q-Exponential Probability Discounting of Gain and Loss

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DOI: 10.4236/am.2013.46120    3,628 Downloads   5,465 Views   Citations

ABSTRACT

Probability discounting is defined as the devaluation of outcomes as the probability of receiving or paying those decreases. A q-exponential probability discounting model based on Tsallis’ statistics has been proposed in econophysics (Takahashi, 2007, Physica A). We examined (a) fitness of the models to behavioral data of probability discounting of both gain and loss; and (b) relationships between parameters in the q-exponential probability discounting model across gain and loss. Our results demonstrated that, for both gain and loss, the q-exponential model better fits the behavioral data than exponential and hyperbolic functions, and there is the sign effect in q-exponential probability discounting. Relationships between Kahneman-Tversky’s prospect theory in behavioral economics and the q-exponential probability discounting are high-lightened.

Conflicts of Interest

The authors declare no conflicts of interest.

Cite this paper

T. Takahashi, R. Han, H. Nishinaka, T. Makino and H. Fukui, "The q-Exponential Probability Discounting of Gain and Loss," Applied Mathematics, Vol. 4 No. 6, 2013, pp. 876-881. doi: 10.4236/am.2013.46120.

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