Violations at the Reference Point of Discontinuity: Limitations of Prospect Theory and an Alternative Model of Risk Choices

  title={Violations at the Reference Point of Discontinuity: Limitations of Prospect Theory and an Alternative Model of Risk Choices},
  author={Aaron Anil Chadee and Xsitaaz T. Chadee and Clyde Chadee and Festus Otuloge},
  journal={Emerging Science Journal},
The tilted S-shaped utility function proposed in Prospect Theory (PT) relied fundamentally on the geometrical notion that there is a discontinuity between gains and losses, and that individual preferences change relative to a reference point. This results in PT having three distinct parameters; concavity, convexity and the reference point represented as a disjoint between the concavity and convexity sections of the curve. The objective of this paper is to examine the geometrical violations of… 

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