The Role of Aspiration Level in Risky Choice: A Comparison of Cumulative Prospect Theory and SP/A Theory.

In recent years, descriptive models of risky choice have incorporated features that reflect the importance of particular outcome values in choice. Cumulative prospect theory (CPT) does this by inserting a reference point in the utility function. SP/A (security-potential/aspiration) theory uses aspiration level as a second criterion in the choice process. Experiment 1 compares the ability of the CPT and SP/A models to account for the same within-subjects data set and finds in favor of SP/A. Experiment 2 replicates the main finding of Experiment 1 in a between-subjects design. The final discussion brackets the SP/A result by showing the impact on fit of both decreasing and increasing the number of free parameters. We also suggest how the SP/A approach might be useful in modeling investment decision making in a descriptively more valid way and conclude with comments on the relation between descriptive and normative theories of risky choice. Copyright 1999 Academic Press.