arXiv AI

Prospect Theory in Large Language Models: A Meta-Analysis of Loss Aversion, Diminishing Sensitivity, and Probability Weighting

arXiv AI
Sep 10

KTO: Model Alignment as Prospect Theoretic Optimization

The paper introduces KTO, a new loss function that aligns large language models with human preferences by directly maximizing a prospect-theoretic utility function rather than log-likelihood of preferences. It builds on the idea that existing alignment objectives implicitly use human-aware losses (HALOs) that reflect biases such as loss aversion. KTO achieves performance comparable to or better than preference-based methods across 1B to 30B parameter models while only requiring a binary desirability signal, and it highlights that no single HALO is universally best, emphasizing the importance of choosing the right inductive biases for a given setting.

By Kawin Ethayarajh, Winnie Xu, Niklas Muennighoff, Dan Jurafsky, Douwe Kiela
arXiv AI
Oct 19

Compression Precedes, Content Decides: Emergent Misalignment in Reward Models

The paper investigates emergent misalignment in reward models, showing that fine‑tuning reward models to prefer harmful content in a single domain (medical or financial) causes the preference to generalize to seven other domains. The authors fine‑tune two state‑of‑the‑art reward models—Skywork‑Reward‑V2‑Llama‑3.1‑8B and Skywork‑Reward‑V2‑Qwen3‑8B—and find that the models still perform well on the standard RewardBench 2 evaluation while exhibiting a preference for harm. Mechanistically, the study identifies two key changes in the reward models’ representations: a geometric compression that reduces the angle between sound and harmful responses, and a content‑specific rotation that aligns harmful representations more closely with the scalar head, thereby increasing their reward score.

By Dhruv Puri, Nikhil Prakash
arXiv Computation and Language
Oct 8

The Long Road to the Same Answer: Cognitive Bias Under Escalating Reasoning Budgets in Large Language Models

The study investigates whether large language models (LLMs) that allocate extra computation during inference—termed reasoning models—reduce classic decision biases compared to their non‑reasoning counterparts. Using 30 vignettes covering six cognitive biases and varying token budgets up to 8,192 tokens, the authors find that reasoning models are not less biased, and increased deliberation does not reliably diminish bias magnitude. Only anchoring showed a bias in the human direction, while other biases either remained unchanged or moved further from human patterns, suggesting that test‑time reasoning does not guarantee rationality.

By Obada Kraishan
arXiv AI
Jul 28

Rethinking Prospect Theory for LLMs: Revealing the Instability of Decision-Making under Epistemic Uncertainty

arXiv:2508. 08992v4 Announce Type: replace Abstract: Real-world decision-making often involves uncertainty expressed in linguistic rather than numerical terms, and Prospect Theory (PT) provides a classic framework for modeling human behavior under such uncertainty.

By Rui Wang, Qihan Lin, Jiayu Liu, Qing Zong, Tianshi Zheng, Dadi Guo, Haochen Shi, Peixuan Han, Weiqi Wang, Yangqiu Song
arXiv Computation and Language
1d ago

The psychophysics of affect in large language models

arXiv:2610.40985v1 Announce Type: cross Abstract: Good decisions often require considering how outcomes will feel. Yet large language models (LLMs) increasingly enter decision workflows, despite litt...

By Joseph Marks (NatWest Group, London, UK), Marius C. Vollberg (University of Zurich, Zurich, Switzerland, Swiss Center for Affective Sciences, Geneva, Switzerland)