Consumers’ Perceived Profit for Online Trading Based on Prospect Theory

ABSTRACT

As decision makers of online trading, consumers make trading decisions according to their perceived profit value. Considering both the objective profit value and consumers’ trust profit (or loss) value according to the evaluation of historical buyers, this paper proposed an analytic method about perceived profit value based on prospect theory. Firstly, it described the variables related to the calculation of perceived profit value. Next, based on the thought of reference dependent, loss aversion and diminishing sensitivity, it calculated consumers’ perceived value according to each evaluation grade. Then, it used the distorted probability judgment thought to achieve the corresponding perceived weight of each evaluation grade according to its statistical probability. Finally, it calculated consumers’ total perceived profit value based on the above. An example was illustrated to explain the concrete calculation processes.

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