Contrasting Rational and Psychological Analyses of Political Choice

TLDR

The study contrasts expected utility theory with prospect theory to analyze political choice between candidates and referenda, and examines the rationality of voting. The authors compare expected utility and prospect theory by applying them to political candidate and referendum choice problems, contrasting normative and descriptive uncertainty analyses. The results confirm prospect theory predictions: respondents are risk‑averse on gains, risk‑seeking on losses, more loss‑averse, leading to incumbent advantage normally and challenger advantage in downturns, and reference‑point shifts can reverse preferences, contradicting invariance.

Abstract

We contrast the rational theory of choice in the form of expected utility theory with descriptive psychological analysis in the form of prospect theory, using problems involving the choice between political candidates and public referendum issues. The results showed that the assumptions underlying the classical theory of risky choice are systematically violated in the manner predicted by prospect theory. In particular, our respondents exhibited risk aversion in the domain of gains, risk seeking in the domain of losses, and a greater sensitivity to losses than to gains. This is consistent with the advantage of the incumbent under normal conditions and the potential advantage of the challenger in bad times. The results further show how a shift in the reference point could lead to reversals of preferences in the evaluation of political and economic options, contrary to the assumption of invariance. Finally, we contrast the normative and descriptive analyses of uncertainty in choice and address the rationality of voting.