Advances in prospect theory: Cumulative representation of uncertainty

  title={Advances in prospect theory: Cumulative representation of uncertainty},
  author={Amos Tversky and Daniel Kahneman},
  journal={Journal of Risk and Uncertainty},
We develop a new version of prospect theory that employs cumulative rather than separable decision weights and extends the theory in several respects. This version, called cumulative prospect theory, applies to uncertain as well as to risky prospects with any number of outcomes, and it allows different weighting functions for gains and for losses. Two principles, diminishing sensitivity and loss aversion, are invoked to explain the characteristic curvature of the value function and the… Expand

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