TITLE:
The q-Exponential Probability Discounting of Gain and Loss
AUTHORS:
Taiki Takahashi, Ruokang Han, Hiroshi Nishinaka, Takaki Makino, Hiroki Fukui
KEYWORDS:
Probability Discounting; Neuroeconomics; Econophysics; Tsallis’ Statistics
JOURNAL NAME:
Applied Mathematics,
Vol.4 No.6,
June
3,
2013
ABSTRACT: Probability discounting is defined as the devaluation of outcomes as the probability of receiving or paying those decreases. A q-exponential probability discounting model based on Tsallis’ statistics has been proposed in econophysics (Takahashi, 2007, Physica A). We examined (a) fitness of the models to behavioral data of probability discounting of both gain and loss; and (b) relationships between parameters in the q-exponential probability discounting model across gain and loss. Our results demonstrated that, for both gain and loss, the q-exponential model better fits the behavioral data than exponential and hyperbolic functions, and there is the sign effect in q-exponential probability discounting. Relationships between Kahneman-Tversky’s prospect theory in behavioral economics and the q-exponential probability discounting are high-lightened.