Schmidt, Ulrich and Zank, H. (2009) A simple model of cumulative prospect theory. Journal of Mathematical Economics, 45 (3-4). pp. 308-319. DOI 10.1016/j.jmateco.2008.12.001.

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Abstract

The present paper combines loss attitudes and linear utility by providing an axiomatic analysis of cumulative prospect theory (CPT) in the framework for decision under uncertainty. We derive a two-sided variant of Choquet expected utility (CEU) with possibly different capacities for gains and for losses, and linear utility. Naturally, utility may have a kink at the status quo, which allows for the exhibition of loss aversion. The central condition of our model is termed independence of common increments. (C) 2008 Elsevier B.V. All rights reserved.

Document Type:	Article
Keywords:	comonotonic sure-thing principlecumulative prospect theory linear utility loss aversion linear utility-models expected-utility risk-aversion nonexpected utility dual theory nonadditive probabilities subjective-probability uncertainty decision choice
Research affiliation:	Kiel University OceanRep > The Future Ocean - Cluster of Excellence
Refereed:	Yes
Open Access Journal?:	No
Publisher:	Elsevier
Projects:	Future Ocean
Date Deposited:	11 Feb 2011 12:15
Last Modified:	23 Sep 2019 21:07
URI:	https://oceanrep.geomar.de/id/eprint/9708

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