Expected Subjective Value Theory: A representation of decision under risk and certainty

Abstract: We present a descriptive model of choice with normative foundations based on how the brain is thought to represent value. An individual’s behavior is fully described by two primitives: an individual’s expectation and one free parameter we call “predisposition’. The model captures the same apparent preference phenomena illustrated by Prospect Theory but unlike Prospect Theory accounts for individual heterogeneity in parameters, employs far fewer parameters than full prospect theory, and retains neurobiological plausibility as a causal model of the choice process. Additionally, our theory makes a series of novel predictions amenable to future testing and includes an alternative explanation for endowment effect.

Bio: Prof Tymula (University of Sydney) combines theory and methodology from economics, psychology, and neuroscience to understand how people decide, why they make wrong decisions, and how to make them better choosers. Her research focused on how economic preferences change over the lifespan and contexts, including how thirst, being observed, outdoor luminance, as well as the structure of current and past choice sets affect behaviour. Prof. Tymula has been awarded over $33 million in grants as a Chief Investigator, including ARC Centre of Excellence, DECRA, Discovery, and Linkage grants. In 2017 she received the Award from the Society for Neuroeconomics for her contributions to our understanding of decision-making. She is a board member of the Society for Neuroeconomics and Executive Committee Member of the Economic Science Association.

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