Probability weighting in different domains: The role of affect, fungibility, and stakes

This paper reports the results of a laboratory experiment in which probability weighting functions for risky gains were elicited non-parametrically in over 500 incentivized subjects. I compared probability weights for monetary rewards to two less fungible domains involving vouchers for different types of consumption, inducing stronger or weaker (positive) emotions. The level of stakes was also manipulated. I found that the probability to win monetary rewards was weighted almost linearly in the high stakes condition, the probability to win vouchers associated with stronger positive affect was underweighted and the probability to win affect-poor vouchers was strongly underweighted. Substantial underweighting also prevailed in all three domains in the low stakes condition.