In This Article Expand or collapse the "in this article" section Prospect Theory in International Relations

  • Introduction
  • Review Articles
  • Initial Applications in International Relations
  • Risk-Acceptant Foreign Policies
  • Policy Preferences
  • Going to War
  • Deterrence Failure
  • Negotiation
  • Comparative Politics
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International Relations Prospect Theory in International Relations
by
Jeffrey D. Berejikian
  • LAST REVIEWED: 25 February 2016
  • LAST MODIFIED: 25 February 2016
  • DOI: 10.1093/obo/9780199743292-0163

Introduction

Prospect theory was initially developed by Daniel Kahneman and Amos Tversky as an alternative to expected utility theory for understanding human decisions under conditions of risk. The theory describes how individuals evaluate and choose between available options, and is used to explain why people consistently deviate from the predictions of rational choice. The most commonly utilized finding of prospect theory in the international relations literature is the so-called framing effect. Individuals tend toward risk acceptance when confronted with choices between losses (losses frame) and risk aversion when confronted with choices over gains (gains frame). Kahneman and Tversky modified prospect theory in 1992 to account for decisions under uncertainty and risk. Subsequent work in neuroeconomics suggests that elements of prospect theory are hard-wired into the human brain. Early applications of prospect theory in the field of international relations were largely conceptual and highlighted the potential to explain anomalies in foreign policy behavior that remained elusive to rational choice explanations. Initial empirical work focused on developing detailed case studies of discrete foreign policy decisions, emphasized the role of framing effects on elite decision making, and largely eschewed deeper theoretical development. Subsequent research placed greater emphasis on constructing deductive theories for empirical examination and applied these to a broader range of topics. Scholars importing prospect theory to international relations confront several challenges. Prospect theory lacks a “theory of framing.” Decision makers often confront competing frames across foreign policy issues, and these issues often overlap. Empirically establishing which frame is dominant in the minds of actors is proving to be more difficult in international relations than it was in the field of economics. International relations specialists are often forced to offer detailed depictions of how policymakers subjectively construct the frames through which they understand their options. For this reason, empirical testing continues to rely heavily upon case studies, and statistical analysis is rare.

General Overviews

Prospect theory was initially introduced to international relations through a series of conceptual articles and case studies examining the origins of risk-acceptant foreign policies. In order to better understand aspects of foreign policy that could not be easily accommodated under rationalist frameworks, initial research focused on direct comparisons of prospect theory with rational choice. While this approach continues, the research program has matured, in that many scholars now also emphasize the importance of theoretically motivated empirical work. It is now common for elements of prospect theory to be integrated into a larger framework that identifies broad patterns of foreign policy behavior. International conflict remains a primary empirical focus, but there is also additional work on policy preference formation, international bargaining, deterrence, and various topics in comparative politics. With few exceptions, scholars continue to deploy case studies as their primary empirical strategy. While there is no single journal dedicated to prospect theory in international relations, the journal Political Psychology is a common outlet for such research.

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