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The contribution of Daniel Kahneman to the psychology of thinking
Zelinová, Alena ; Heller, Daniel (advisor) ; Uhlář, Pavel (referee)
Bachelor thesis in the form of scoping study summarizes Daniel Kahneman contribution to the psychology of thinking. It surveys his work from the 70s of the 20th century the subjective probability, which deals with the application of heuristics and biases in the judgement of uncertain events. It continues with prospect theory which is a descriptive model of human decision making under risk, and which reveals the automatic and systematic violations of principles of rationality in decision making. After that it focuses on Kahneman's research from the 90s in the field of hedonic psychology from the perspective of a cognitive psychologist. The thesis completes with his current work popularizing the fast and slow thinking. Part of this work is a research proposal of the price of memories from holidays, aiming to verify Kahneman's concept of the difference between the experienced utility and decision utility.
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Prospect Theory in the Cryptocurrency Market
Coufalová, Kristýna ; Kukačka, Jiří (advisor) ; Kučera, Tomáš (referee)
This thesis investigates the potential of cumulative prospect theory to ex- plain future cryptocurrencies' returns. Moreover, the study aims to determine whether the predictive power of cumulative prospect theory value persists when cumulative prospect theory value is computed by plugging the percentage form of return (for instance, 5%) instead of the decimal form (for instance, 0.05). Using a rolling sample of 200 cryptocurrencies with the highest market capitali- sation for each month from March 2017 to March 2023, we found that regardless of using returns in percentage or decimal form, the cumulative prospect theory value function produces comparative abnormal portfolio returns and confirms the hypothesis that cryptocurrencies with high (low) cumulative prospect the- ory value earn low (high) subsequent returns. JEL Classification G11, G12, G41 Keywords Prospect theory, Cumulative Prospect Theory, Cryptocurrency, Behavioural Economics Title Prospect Theory in the Cryptocurrency Market Author's e-mail 31078966@fsv.cuni.cz Supervisor's e-mail jiri.kukacka@fsv.cuni.cz
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A behavioral analysis of market failures
Urbanová, Aneta ; Sieber, Martina (advisor) ; Vlček, Josef (referee)
The thesis deals with a contemporary stream of the behavioral economics at the labour market in connection with a divergence to the neoclassical theory based on explicit assumption of rationality. The existing theoretical approaches and the examples of experiments are introduced in the theoretical part. The irrational impacts on labour market is defined by the amount of wage, unemployment, education, but on the other hand also by motivation, loss aversion, prejudices and other cognitive biases in human decision making process. The practical part is based on the standardized questionnaire survey in which the respondents were given some simplified decision making dilemmas in context of the labour market. The aim of the thesis is to observe their tendency to choose not always the most effective option and to validate the impact of irrational factors on decision making according to the theoretical approaches. Key words: Behavioral economics, limited rationality, market failures, labour market, prospect theory, heuristics, biases
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Aplication of behavioral psychology in marketing focusing price stimuli
Ptáčková, Marta ; Hofmannová, Jitka (advisor) ; Vranka, Marek (referee)
Price is a part of the marketing mix and plays an important role in decision making process of a consumer. The dissertation's main aim is to examine what lies behind shopping decisions. The text is divided in two parts. The first part summarizes findings of different authors on how the shopping decision is being made and how important emotions are to make a shopping decision. Since stories are not emotionally neutral, it also analyses the impact of storytelling on price people are willing to pay and if this price has an effect on perception of quality. The second part comprises the author's own research. Six in-depth interviews were conducted to put the previous findings into context and to gain a new perspective on the topic.
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Decision-making under risk, betting
Herold, Martin ; Hlaváček, Jiří (advisor) ; Pěkná, Martina (referee)
The volume of money bet on the Czech market already exceeded one hundred billion and continues to increase. Therefore, the demand for relevant analysis concerning behaviour of players grows. This thesis aims to study decision making under risk in the environment of gambling and illuminates the discrepancies, provided risk averse consumers are the bettors. The thesis asks the question why people are willing to participate in games with negative expected value and what is their real motivation for gambling, what phenomena determine their view on betting opportunity and how they cope with theoretical models. The theoretical part focuses on existing models of decision making under risk theory and critically evaluates their ability to plausibly reflect reality. Consequently, models such as the expected value, expected utility and prospect theory are introduced, including other basic concepts. In the second section, socioeconomic determinants of player's behaviour are evaluated, improving expected utility theory. In the final section, the thesis demonstrates gathered evidence and possible improvements of the prospect theory model. Although conclusions are not unequivocal, the work provides a comprehensive insight into the utility theory and decision making under risk in an environment of betting.
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The contribution of Daniel Kahneman to the psychology of thinking
Zelinová, Alena ; Heller, Daniel (advisor) ; Uhlář, Pavel (referee)
Bachelor thesis in the form of scoping study summarizes Daniel Kahneman contribution to the psychology of thinking. It surveys his work from the 70s of the 20th century the subjective probability, which deals with the application of heuristics and biases in the judgement of uncertain events. It continues with prospect theory which is a descriptive model of human decision making under risk, and which reveals the automatic and systematic violations of principles of rationality in decision making. After that it focuses on Kahneman's research from the 90s in the field of hedonic psychology from the perspective of a cognitive psychologist. The thesis completes with his current work popularizing the fast and slow thinking. Part of this work is a research proposal of the price of memories from holidays, aiming to verify Kahneman's concept of the difference between the experienced utility and decision utility.
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Prospect Theory and Inertia in a Heterogeneous Agent Model
Polách, Jan ; Kukačka, Jiří (advisor) ; Klinger, Tomáš (referee)
Using the Heterogeneous Agent Model framework, we develop and incorporate an extension based on Prospect Theory into a popular agent-based asset pric- ing model. The extension covers the phenomenon of loss aversion manifested mainly in risk aversion and asymmetric treatment of gains and losses. Ad- ditionally, we explore a special case of the model's intrinsic dynamics termed Asynchronous Updating that affects agents' selection of trading strategies and mimics the investor inertia effect. Using Monte Carlo methods, we investigate behavior and statistical properties of the extended versions of the model and assess relevance of the extensions with respect to empirical data and stylized facts of financial time series. We find that the Prospect Theory extension is fea- sible, that it keeps the essential underlying mechanics of the model intact, and that it changes the model's dynamics considerably. Moreover, the extension shifts the model closer to the behavior of real-world stock markets. Contrar- ily, the Asynchronous Updating feature does not produce statistically different empirical distributions of most of the main variables. However, it dramati- cally increases chances of fundamentalists to survive in the market even when changes to more profitable strategies are increasingly facile. Bibliographic...
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Comparison of the three utility functions and their application to various aspects of consumer behavior
Mišuráková, Mária ; Koubek, Ivo (advisor) ; Bobková, Božena (referee)
Many economists have tried to measure the utility of wealth and to predict human behavior based on this. In my thesis, I describe three such models - the expected utility theory, the prospect theory and the maximization of the probability of economic survival theory. Using an experiment, I try to figure out which model best represents the reality. For this purpose I developed an economic game to observe decisions of people in situations involving risk which I performed with a group of high-school students. The best representation of their behavior appears to be a convex utility function according to the expected utility theory. The implied risk-seeking is, in my opinion, caused by the fact that the experiment was conducted under laboratory conditions.
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Money Illusion and Sunk Costs
Javor, Matúš ; Musil, Martin (advisor) ; Dvořák, Jiří (referee)
Bachelor thesis on the topic Money Illusion and Sunk Costs deals with irrational behaviour of individuals, or more precisely with effects, which cause such behaviour. Namely, it is the case of phenomenons of money illusion and taking sunk costs into account. The main purpose of the thesis is to summarize theoretical knowledge about the phenomenons and subsequently, using the experiment, apply and verify gained theoretical knowledge on representative sample of individuals.
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How much are we afraid of losing? Analysis of risk aversion.
Vokounová, Tereza ; Dlouhá, Zuzana (advisor) ; Čermáková, Klára (referee)
The whole thesis is focused on exploring how individuals make decisions under conditions of risk and uncertainty. The first section describes several economic theories, regarding explanation of human actions. The study points to the fact that the method of maximization expected utility cannot explain some examples of human decisions (eg. Allais paradoxes or the four-fold pattern) and to explain these effects, it is preferable to use prospect theory or cumulative prospect theory. In the second section, also based on results from the survey, I investigate the actual risk aversion in different situations (willingness to take risk in general, car driving, financial matters, sport and leisure, career and health) based on various factors. Statistically significant factor in all situations is gender when women show greater risk aversion in comparison to men. Age is a significant factor only in the willingness to take risk in general and in car driving. While in the willingness to take risks in general is a positive relationship between age and risk aversion, in car driving the relation is exactly the opposite. Level of education influences risk aversion in three situations - at risk in general (risk aversion increases with higher education), sport (risk aversion increases with higher education) and health issues (risk aversion decreases with higher education). In the health issues are people studying or working in the construction industry more risk-averse compared to people studying or working in the field of economics/finance. In car driving are individuals studying or working in the field of law more risk-averse than students or workers in the field of economics/finance. Another important factor is whether a person is working in public or private sector. In car driving, financial matters, career and health are people working in public sector more risk-averse compared to students and to people working in the private sector. Willingness to take risk in general is influenced by average monthly income - with a rising average monthly income is also growing willingness to take risks (decreasing risk aversion). Willingness to take risk in general, financial matters and career is higher for people who invest. Sportsmen/women are generally more willing to take risk in car driving, sport and career. Entrepreneurs are more willing to risk in career.
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