Australasian Mathematical Psychology Conference 2019

Mathematical formalization of Construal Level Theory regarding risk preferences at different psychological distances

Junyi Dai
Department of Psychology and Behavioral Sciences, Zhejiang University
Emmanouil Konstantinidis
Center for Decision Research, University of Leeds
Ben Newell
Psychology, University of New South Wales

Construal level theory (CLT) provides a general framework that associates different psychological distances with varying levels of mental construal and thus different evaluations of objects. When risk preference is of concern, it suggests that gambles at short psychological distances tend to be evaluated according to their low-level, subordinate feature (i.e., probability which indicates feasibility), whereas gambles at long psychological distances are more likely to be assessed based on their high-level, superordinate feature (i.e., payoff which indicates desirability). Despite its wide applications CLT is a purely verbal theory without an explicit mathematical representation. Therefore, it is difficult to precisely test its implications regarding the impact of psychological distances on risk preference. In this talk, we sketch a mathematical formalization of CLT regarding risk preference within the general framework of prospect theory. We argue that this formalization leads to a critical prediction of CLT, which is supported by some but not all previous research concerning temporal distance and separate evaluation. We highlight the potential for using this formalization of CLT for other types of psychological distances, as well as other approaches to measuring risk preferences.