A relevant issue in accepting the tenets of Prospect Theory appears to be the absence of evidence
about the extent to which its predictions are valid outside the laboratory where decisionmaking
situations are not highly stylized and where the stakes are high. Barberis (2013) aptly
highlights this shortcoming in his comprehensive review of 30 years of Prospect Theory. He notes
that
While it is widely agreed that prospect theory offers an accurate description of risk attitudes in
experimental settings, some have questioned whether its predictions will retain their accuracy
outside the laboratory, where the stakes are often higher and where people may have significant
experience making the decision at hand. Some direct evidence bears on this issue (Barberis,
2013, p. 179).
The issue remains an empirical question that requires investigation by different authors and
different methods. In this paper I offer some preliminary evidence from the field. In general, the
cases presented here are offered as observations consistent with the predictions of Prospect Theory
in the loss domain. However, they should not be taken as a representative sample of the
population; these cases had evolved in environments of weak management and accounting control
systems.