The Impact of Large-stake Lotteries on Parameters in Prospect Theory via Maximum Likelihood Estimation

Key Points

• Risk preferences may shift significantly due to large-stake lotteries, altering decision-making processes.
• Participants exhibited varied responses, highlighting the influence of financial stakes on risk assessments.
• Analysis utilized maximum likelihood estimation to derive insights on parameter changes in prospect theory.
• Findings suggest a need for deeper understanding of behavioral responses to lottery dynamics.