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Title: TESTING THE LEDDO, JAYANTI AND DUAN (2019) REVISED PROSPECT THEORY VALUE FUNCTION: THE EFFECTS OF FRAMING OF OUTCOMES ON CHINESE STUDENTS’ DECISIONS
Authors: John Leddo, Can Li, Shiyu Dong, Xirui Fan
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John Leddo, Can Li, Shiyu Dong, Xirui Fan John Leddo is the director of research at MyEdMaster, LLC. Can Li, Shiyu Dong and Xirui Fan are researchers at MyEdMaster, LLC
MLA 8 Leddo, John. "TESTING THE LEDDO, JAYANTI AND DUAN (2019) REVISED PROSPECT THEORY VALUE FUNCTION: THE EFFECTS OF FRAMING OF OUTCOMES ON CHINESE STUDENTS’ DECISIONS." Int. j. of Social Science and Economic Research, vol. 7, no. 8, Aug. 2022, pp. 2690-2705, doi.org/10.46609/IJSSER.2022.v07i08.025. Accessed Aug. 2022. APA 6 Leddo, J. (2022, August). TESTING THE LEDDO, JAYANTI AND DUAN (2019) REVISED PROSPECT THEORY VALUE FUNCTION: THE EFFECTS OF FRAMING OF OUTCOMES ON CHINESE STUDENTS’ DECISIONS. Int. j. of Social Science and Economic Research, 7(8), 2690-2705. Retrieved from https://doi.org/10.46609/IJSSER.2022.v07i08.025 Chicago Leddo, John. "TESTING THE LEDDO, JAYANTI AND DUAN (2019) REVISED PROSPECT THEORY VALUE FUNCTION: THE EFFECTS OF FRAMING OF OUTCOMES ON CHINESE STUDENTS’ DECISIONS." Int. j. of Social Science and Economic Research 7, no. 8 (August 2022), 2690-2705. Accessed August, 2022. https://doi.org/10.46609/IJSSER.2022.v07i08.025.
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ABSTRACT: Prospect Theory (Kahneman and Tversky, 1979) predicts decision making when people are confronted with choices involving gains or losses with different degrees of uncertainty. Prospect Theory argues that people are generally risk averse when it comes to seeking gains and risk seeking when it comes to seeking losses. Tversky and Kahneman (1981) even found that framing the same decision in terms of gains or losses could influence whether people were risk averse or risk seeking. Leddo et al. (2019) noted that the original formalization of Prospect Theory did not take into account people’s goals. They argued that people would be willing to take risks to achieve goals but become more risk averse once those goals are achieved, and they would become risk averse when confronted with losses in order to avoid a highly negative outcome but become more risk seeking to negate the negative outcome once it occurred. Leddo et al.’s research confirmed this hypothesis, leading to a revision of Prospect Theory’s value function. Leddo and Elkas (2021) provided further support for this revised value function by showing that when replicating the famous Tversky and Kahneman (1981) framing study but incorporating goals into the gain and loss scenarios, people’s decisions showed a framing effect, but one that followed the Leddo et al. (2019) revised value function.. The present study replicates this Leddo and Elkas (2021) framing study with students from China in order to investigate whether the framing effects found in that study hold up with people from another culture. This hypothesis was tested on 87 high school students using the four scenarios from the Leddo and Elkas (2021) study, which were translated into Chinese. Results showed no main effect in risk seeking behaviors for gain vs. loss-framed outcomes, which was consistent with the revised Leddo et al. (2019) value function but inconsistent with the Kahneman and Tversky (1979) value function. Results also showed no main effect for whether the outcomes were above or below the aspiration/avoidance levels, which was inconsistent with the outcome predicted by the Leddo et al. (2019) value function. Similarly, when decisions were framed in terms of gains, there was no difference in risk seeking behaviors when outcomes were above or below the aspiration level. However, when decisions were framed in terms of losses, participants chose the risky alternative more frequently when the outcome was below the avoidance level than when it was above the avoidance level, a result consistent with the predictions made by the revised Leddo et al. (2019) value function.

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