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Prospective reference theory: Experimental evidence and the connection to anchoring

Johannes Jaspersen et al.

Journal of Risk and Uncertainty2026https://doi.org/10.1007/s11166-026-09482-0article
AJG 3ABDC A*
Weight
0.50

Abstract

When faced with a risky prospect, people often make decisions which are inconsistent with an objective assessment of probability. Viscusi’s Prospective Reference Theory (PRT, 1989) model offers a simple and intuitive framework to model such behavior. We conduct an experiment to test the validity of PRT, focusing on the unique pattern of dominance violations predicted by the model. Subjects’ dominated choices are more consistent with PRT than with other models, providing novel empirical support for PRT. In addition we also test the possible source of the probability distortions. Subjects’ tendency to anchor correlates positively with likelihood insensitivity, implying that for some subjects, their decisions under risk may be caused by heuristic processing. To further illustrate PRT’s potential, we discuss how it applies to several new choice anomalies and extend the model to capture other commonly-observed behaviors, such as choices implying an inverse S-shaped probability weighting function.

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https://doi.org/https://doi.org/10.1007/s11166-026-09482-0

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@article{johannes2026,
  title        = {{Prospective reference theory: Experimental evidence and the connection to anchoring}},
  author       = {Johannes Jaspersen et al.},
  journal      = {Journal of Risk and Uncertainty},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1007/s11166-026-09482-0},
}

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Prospective reference theory: Experimental evidence and the connection to anchoring

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.