Prelec

Prelec typically refers to Drazen Prelec, an economist and professor at the MIT Sloan School of Management. His research spans behavioral decision theory, experimental economics, and decision making under uncertainty. He is best known for introducing the Prelec probability weighting function, a mathematical tool used to model how people distort probabilities in risky choices, and for his contributions to probabilistic models in prospect theory.

The Prelec weighting function is commonly written as w(p) = exp(-β(-ln p)^α) with α > 0 and β > 0, though a one-parameter version sets β = 1. This function maps the unit interval [0,1] to itself and is continuous and strictly increasing. It exhibits an inverse-S shape, typically overweighting small probabilities and underweighting large probabilities. By adjusting α and β, researchers can fit observed deviations from linear probability weighting seen in experimental data.

Applications of the Prelec weighting function appear in prospect theory and, more broadly, in cumulative prospect theory and related models of decision making under risk. The function helps explain why individuals may give disproportionate importance to rare events or to highly probable outcomes, thereby shaping choices in economics, psychology, and behavioral sciences.

The work associated with Prelec has had a lasting impact on how researchers model human perception of risk and uncertainty. The Prelec weighting function remains a widely cited and frequently employed tool for capturing probability distortion in empirical and theoretical studies of decision making under risk.