Prospect theory and foreign policy decision-making: Underexposed issues,advancements, and ways forward |
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Authors: | Barbara Vis Dieuwertje Kuijpers |
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Affiliation: | 1. Utrecht University School of Governance, Utrecht University, Utrecht, Netherlands;2. Independent Investigative Journalist, The Netherlands |
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Abstract: | How much mileage can we get out of prospect theory to explain foreign policy decision-making? To answer this question, we first argue that risk as outcome uncertainty is the appropriate definition in prospect-theoretical applications. Then, we indicate that probability weighting—a crucial component of prospect theory—is typically ignored in such applications. We argue why this is problematic and suggest how to move forward. Next, we discuss how to establish the reference point in the face of outcomes in multiple dimensions, as is typically the case in foreign policy decision-making. Finally, we discuss what we have learnt regarding prospect theory’s scope conditions and the differences across individuals in the theory’s applicability. Overall, our contribution lies in identifying several underexposed or neglected issues (e.g., the definition of risk and probability weighting), in examining the advancements regarding prospect theory’s scope conditions, and in discussing avenues for further research. |
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Keywords: | Foreign policy analysis risk uncertainty prospect theory decision-making |
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