Barbara Vis and Dieuwertje Kuijpers, “Prospect Theory and Foreign Policy
Decision-Making: Underexposed Issues, Advancements, and Ways
Forward.” Contemporary Security Policy 39(4): 575-589, 2018.
• Risk, in both prospect theory and in useful foreign policy applications, involves outcome uncertainty—so risk considerations are important in the gains domain as well as the loss domain.
• Probability weighting often is ignored in applications of prospect theory, but it can override the usual “risk averse for gains, risk loving for losses” result.
• In particular, low probability gains might see risk loving behavior, and low probability losses might be met with risk averse behavior.
• And in foreign policy applications, low probabilities for unusual events are common.
• Multiple dimensions are relevant in foreign policy decisions, so there can be multiple reference points, and outcomes might involve gains with respect to some reference points but losses with respect to other reference points.
• When (to whom and for what decisions) might prospect theory apply? What decisions are better described by expected utility theory?
• Oddly, ambiguity goes unmentioned in this article.
• Risk, in both prospect theory and in useful foreign policy applications, involves outcome uncertainty—so risk considerations are important in the gains domain as well as the loss domain.
• Probability weighting often is ignored in applications of prospect theory, but it can override the usual “risk averse for gains, risk loving for losses” result.
• In particular, low probability gains might see risk loving behavior, and low probability losses might be met with risk averse behavior.
• And in foreign policy applications, low probabilities for unusual events are common.
• Multiple dimensions are relevant in foreign policy decisions, so there can be multiple reference points, and outcomes might involve gains with respect to some reference points but losses with respect to other reference points.
• When (to whom and for what decisions) might prospect theory apply? What decisions are better described by expected utility theory?
• Oddly, ambiguity goes unmentioned in this article.
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