Learning prospect theory value function and reference point of a sequential decision maker

Given a decision problem, the reference point of a person determines whether the outcomes are perceived as gain or loss and influences the decision. In this paper, we assume that a person is given the same decision problem repeatedly, and the person chooses an action to maximize her value function while her reference point could possibly change over time. We estimate the value function and the reference point of the person from the observed actions by constructing a hidden Markov model and using the expectation-maximization algorithm. Then we test the suggested algorithm on the data set of New York City taxi drivers.

[1]  A. Tversky,et al.  Loss Aversion in Riskless Choice: A Reference-Dependent Model , 1991 .

[2]  Ariel Rubinstein,et al.  Lecture Notes in Microeconomic Theory: The Economic Agent - Second Edition , 2006 .

[3]  Moshe Ben-Akiva,et al.  Adaptive route choices in risky traffic networks: A prospect theory approach , 2010 .

[4]  R. Thaler,et al.  Labor Supply of New York City Cabdrivers: One Day at a Time , 1997 .

[5]  G. G. Stokes.  "J." , 1890, The New Yale Book of Quotations.

[6]  A. Tversky,et al.  Advances in prospect theory: Cumulative representation of uncertainty , 1992 .

[7]  Karl Henrik Johansson,et al.  An efficiency measure for road transportation networks with application to two case studies , 2015, 2015 54th IEEE Conference on Decision and Control (CDC).

[8]  John W. Polak,et al.  Modelling travellers’ risky choice in a revealed preference context: a comparison of EUT and non-EUT approaches , 2012 .

[9]  A. Tversky,et al.  Prospect theory: an analysis of decision under risk — Source link , 2007 .

[10]  H. Farber.  Reference-Dependent Preferences and Labor Supply: The Case of New York City Taxi Drivers , 2008 .

[11]  Shiquan Zhong,et al.  Prospect theory based estimation of drivers' risk attitudes in route choice behaviors. , 2014, Accident; analysis and prevention.

[12]  Piet H. L. Bovy,et al.  Identification of Parameters for a Prospect Theory Model for Travel Choice Analysis , 2008 .

[13]  Eric R. Ziegel,et al.  The Elements of Statistical Learning , 2003, Technometrics.

[14]  Daniel B. Work,et al.  Using coarse GPS data to quantify city-scale transportation system resilience to extreme events , 2015, ArXiv.

[15]  Daphne Koller,et al.  Learning an Agent's Utility Function by Observing Behavior , 2001, ICML.

[17]  Juanjuan Meng,et al.  research platform to scholars worldwide. New York City Cabdrivers ’ Labor Supply Revisited: Reference-Dependent Preferences with Rational-Expectations Targets for Hours and Income , 2008 .

[18]  Andrew Y. Ng,et al.  Pharmacokinetics of a novel formulation of ivermectin after administration to goats , 2000, ICML.

[19]  M. Rabin,et al.  A Model of Reference-Dependent Preferences , 2006 .