Seeing Through Risk: A Symbolic Approximation of Prospect Theory

• URL: http://arxiv.org/abs/2504.14448v1
• Date: Sun, 20 Apr 2025 01:44:54 GMT
• Title: Seeing Through Risk: A Symbolic Approximation of Prospect Theory
• Authors: Ali Arslan Yousaf, Umair Rehman, Muhammad Umair Danish,
• Abstract summary: We propose a novel symbolic modeling framework for decision-making under risk.<n>Our approach replaces opaque utility curves and probability weighting functions with transparent, effect-size-guided features.<n>We mathematically formalize the method, demonstrate its ability to replicate well-known framing and loss-aversion phenomena, and provide an end-to-end empirical validation on synthetic datasets.
• Score: 0.0
• License: http://creativecommons.org/licenses/by/4.0/
• Abstract: We propose a novel symbolic modeling framework for decision-making under risk that merges interpretability with the core insights of Prospect Theory. Our approach replaces opaque utility curves and probability weighting functions with transparent, effect-size-guided features. We mathematically formalize the method, demonstrate its ability to replicate well-known framing and loss-aversion phenomena, and provide an end-to-end empirical validation on synthetic datasets. The resulting model achieves competitive predictive performance while yielding clear coefficients mapped onto psychological constructs, making it suitable for applications ranging from AI safety to economic policy analysis.

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