Customer Reviews: Choices, Values, and Frames
Amazon Vehicles Oct16 Amazon Fashion nav_sap_plcc_ascpsc Electronics Holiday Gift Guide Starting at $39.99 Subscribe & Save Cozy Knits Book 2 or More Hours of House Cleaning on Amazon fin fin fin  All-New Echo Dot Starting at $89.99 All-New Kindle Oasis hhnsweeps Shop Cycling on Amazon

Customer Reviews

4.6 out of 5 stars
Format: Paperback|Change
Price:$75.99+ Free shipping with Amazon Prime
Your rating(Clear)Rate this item

There was a problem filtering reviews right now. Please try again later.

on July 15, 2003
Kahneman and Tversky's compilation of articles in this book is an outstanding exposition of recent advances in cognitive psychology, especially advances associated with prospect theory. The work presented in this volume is largely responsible for the authors being awarded the Nobel Prize (Tversky died before receiving it).
The text is somewhat dense at parts, being aimed at economists and psychologists with some mathematical familiarity. However, the portions of the book that require much mathematics can safely be bypassed without losing much of the substance of the text. This text is the most credible presentation of an alternative theory to the rational actor theory usually assumed in economics. For example, some of the articles help explain the magnitude of the equity return premium, or help show how people make choices differently in similar situations based simply on the way the situation is presented.
I would highly recommend this book to anyone interested in decision making theory, especially as it relates to consumer behavior. It is a brilliant volume that includes the most important articles by the leading mind in the field.
0Comment| 73 people found this helpful. Was this review helpful to you?YesNoReport abuse
on August 23, 2001
Daniel Kahneman and Amos Tversky have spent their whole lives developing an alternative to the "rational actor" model of human decision-making, the standard of traditional economic theory and the decision sciences. Their ideas were received rather well from the start, but in recent years, their alternative, which we can fairly call "behavioral economics" has virtually displaced traditional decision theory as an active research area.
People often think of the Kahneman-Tversky behaviorists as "bomb-throwers" in the sense that they appear to love to destroy traditional concepts of rationality rather that put constructive models in their place. This collection, which consists of 42 very high quality essays by the leading lights of the field, shows clearly that this is not the case. Prospect theory, loss aversion, framing effets, status quo effect, and the like are carefully modeled in this book. I came away quite impressed.
It is a shame that Amos Tversky never lived to see the light of day of this fine volume. It is certainly a vigorous vindication of his lifetime research agenda.
0Comment| 65 people found this helpful. Was this review helpful to you?YesNoReport abuse
on January 8, 2006
Daniel Kahneman and the late Amos Tversky are two of the Godfathers of behavioural economics - and their body of work since the 1970s gave a really firm yank on the rug of rationality that had thus-far supported traditional theories of human economic behaviour. The "rational consumer" we met in Economics 101 is actually a bundle of conflicts and paradoxes - and this volume is a colleciton of 42 essays that explain why people can make seemingly illogical decisions when confronted by choices, or risks.

The papers, some of them densely mathematical and others written in cogent plain English, demonstrate through experiments and some quite entertaining observations the various layers of logic we use when we make trade-off decisions.

One human skew comes from the way we tend to weigh up uncertainty and risk: and our tendency to vividly imagine downsides while having only a loose picture of upsides.

A second family of biases comes from our tendency to contextualise decisions and choices in different ways: to "reframe" the way we see problems and thus skew our outcomes.

A third family of human biases comes from our many perceptual biases, for example in the way we recall standout features from one sample, and then act as if these standouts (a couple of famous names for example)are representative of the whole sample.

Taken together we get a rich picture of human decision behaviour that is applicable in economics, marketing or - (for example) in the specific worlds of medical professionals who must evaluate data, frame each situation and make critical professional decisions.

This text is important, and provides rich reading for researchers in a wide number of fields. In the last 100 years of the history of human psychology, the emphasis has generally been on the background the nature/nurture of the subject. Kahneman and Tversky and their good company of researchers demonstrate that if we shine the spotlight on the decision-making processes of humans we can uncover many, many answers to why we behave as we do.

I took a star off for those hyper-mathematical papers. These weren't at all user friendly, and while I use statistical analysis each day in my work, I'm old-fashioned enough to think that a book still must communicate verbally. But that's my skew. Don't let it put you off the importance of this collection of extremely interesting studies.
0Comment| 20 people found this helpful. Was this review helpful to you?YesNoReport abuse
on December 1, 2001
A definitive text. Choices, Values and Frames is no casual read but is a first class exposition of the basics in this area of cognitive psychology. I read it from the perspective of a healthcare practitioner trying to understand more about why 'risk' judgements seem so variable and subjective. The insights gained from Choices, Values and Frames have already modified my behaviour.
The only weakness of the text is that it assumes that the reader has reasonable literacy in manipulating abstract mathematical concepts. More exposition would have been appreciated here. However, even if one does not understand the more 'mathematical' sections the book as a whole is still an engaging exposition of how humans process decisions under risk and uncertainty.
A 'must read' for anybody seriously interested in, but unfamiliar with, this area of cognitive psychology
0Comment| 44 people found this helpful. Was this review helpful to you?YesNoReport abuse
on July 31, 2006
I wonder, what can one say abot work that has already won the Nobel Prize that can possibly add to the estimation of a work? Being far too insignificant to lend any great weight to the already abundant praise for this work, I can only perhaps illuminate an application of the material that seems to have been overlooked.

Regarding the field of risk management (not the wll street kind, but just regular risk decision making in business) this book is of inestimable value. I have often notices certain biases towards risk aversion or risk taking when business decisions are beign made. Much seemed to be due to the context. This work shows exactly why and how decision bias arises. This is the foundation for the creation of a useful risk decision analytical framework.

The paper of interest to me relate to why people will choose to take or avoid risks that, according to utility theory, are the wrong decisions. For example, why pepole buy insurance even when it is a better financial choice to be uninsured. These works explain why and under what circumstances one's biases override logic. Why this is not a common text on the desk of every risk manager, I will never know.

In this one volume, there is enough information to design an utterly new field of risk management and to solve most every problem one can face. This has become the one reference material that I considre indespensible. throw out the CPCU and ARM texts that you never use and can't bear to read ever again. Chuck them and place this volume in their place and you will be far, far better off.
0Comment| 5 people found this helpful. Was this review helpful to you?YesNoReport abuse
HALL OF FAMEon December 22, 2006
Most, if not all who have done financial modeling have made some use of prospect theory in order to assess and measure risk in financial instruments, although this use has yet to be widespread throughout the risk management community. The reason for this is very simple: prospect theory gives another view of risk that is different from the traditional one offered by classical economics, and one that is closer to what is exemplified in real economic data. Its theoretical foundations are less clear however, as compared to what is found in the now canonical approaches to risk based on Merton, Black, Scholes, etc. In prospect theory it is assumed that individuals make financial decisions relative to a reference point, and loss aversion plays a predominant role. In housing markets for example, some homeowners are reluctant to sell their properties if the prices fall below the market value. Empirical data shows that when house prices decline, houses sit for exceedingly long periods of time with their asking prices exceeding greatly the expected selling prices. These houses are usually withdrawn from the market without being sold. Classical economic theory would suggest that they would be sold with the asking price being very close to the market price, since the sellers are assumed to be rational and weigh expected gains in the same way as they expected losses. In prospect theory however, the value function for an individual is concave in gains but convex in losses, and is much more sensitive to losses that to gains of an equivalent size.

Prospect theory is thoroughly and beautifully discussed in this book and this is due to some degree by the presence of articles written by Daniel Kahneman and Amos Tversky, its originators. As outlined by these two researchers, prospect theory asserts that individuals tend to be sensitive to changes in values rather than absolute values and have diminishing marginal sensitivity to changes. This is reflected in the shape of their utility functions: qualitatively speaking they are steepest in regions where the marginal sensitivity to change is greatest and then they flatten out in directions where the changes in wealth increase. As a consequence, individuals prefer a small gain that is certain to a larger gain that is uncertain. Conversely, they prefer the possibility of a larger gain than the certainty of a small loss.

To motivate the content of the book, Kahneman writes an excellent preface, giving an overview of what to expect in the book and thus allowing readers to assign their own weights to which particular articles they find of interest. Some readers may want to read the entire book, but it seems likely that only selected articles will be chosen for careful study, based of course on the background of the reader. However, the first article in the book, which was published by Kahneman and Tversky in 1983, should probably be read by everyone interested in prospect theory and its foundations. The second article is a more quantitative formulation of what was said in the first, and contains an in-depth critique of expected utility theory. The content of this article should be helpful to those readers who work in a risk management environment and need to construct realistic models of choice under risk.

If the development of these models is guided by prospect theory, the analyst will arrive at a final product that could with fairness be classified as "microeconomic." The challenge in using prospect theory is to conglomerate the individual choices so that a risk manager can speak intelligently of the risk of a portfolio that is based on these individual choices. Some insight that could guide this development can be found in Part Five of the book, which covers applications of prospect theory. One particular article that stands out in this regard is the one by S. Benartzi and R. H. Thaler on the equity premium puzzle. This article attempts to understand, in the context of prospect theory, why fixed income securities have underperformed relative to stocks for the last nine decades, from about a 7% annual real return on stocks to a 1% return on treasury bills. The author's simulations indicate that the loss aversion aspect of prospect theory gives a better explanation to the equity premium puzzle than the traditional approaches based on expected maximum utility.

Still another interesting article in Part Five is the one on the `money illusion' written by E. Shafir, P. Diamond, and A. Tversky, and which first appeared in publication in 1997. The term `money illusion' is used to refer to the tendency of some individuals to think in terms of nominal values instead of real monetary ones. It is thus at odds to the picture offered by classical economics with its assumption of perfect rationality. The authors point to studies in cognitive psychology that indicate that some individuals form alternative representations of identical situations, and that these lead therefore to different responses. Examples of this are given, leading the authors to assert that the money illusion can be interpreted as a bias in assessing the real value of an economic transaction. This bias is induced by a nominal evaluation and its magnitude is determined by the real salience between the nominal and real representations, and the sophistication of the decision maker. The reviewer has used these types of considerations in modeling home equity markets.
0Comment| 10 people found this helpful. Was this review helpful to you?YesNoReport abuse
on July 10, 2015
Not an easy read. This is a collection of technical papers. Popular readers will want to see "Thinking, Fast and Slow" but this (and the companion volume) are vastly important for people working in several disciplines. Having this collection in one volume is important, and a great service.
0Comment|Was this review helpful to you?YesNoReport abuse
on May 28, 2016
Unfortunately these so called "academics" always seem to try to outdo each other in who can put the most amount of long and obscure words together as tightly as possible, and by saying as little as possible.

I wouldn't call myself a dumb guy, but reading just a single page takes me about 10-15 minutes.
0Comment| One person found this helpful. Was this review helpful to you?YesNoReport abuse
on March 6, 2014
A great collection of seminal papers. Gives a good overview of the field of behavioral economics and the connections between paychology and econ.
0Comment|Was this review helpful to you?YesNoReport abuse
on November 3, 2007
This book will enhance your thinking, and open your eyes to human blind spots. It exposes in a very nice way that we humans make illogical choices, and are not as rational as we think.

Read it with an open mind to accepting your own fallibilities. If you understand the concepts presented - you will find yourself immensely enriched, and on the journey to making sound decisions and choices. Brush up on the basics of probability before you delve into the book.

0Comment| 5 people found this helpful. Was this review helpful to you?YesNoReport abuse