Additive Utility in Prospect Theory

Additive Utility in Prospect Theory

Prospect theory is currently the main descriptive theory of decision under uncertainty. It generalizes expected utility by introducing nonlinear decision weighting and loss aversion. A difficulty in the study of multiattribute utility under prospect theory is to determine when an attribute yields a gain or a loss. One possibility, which has been adopted in the existing theoretical literature on...

Non-expected Utility Theories: Weighted Expected, Rank Dependent, and, Cumulative Prospect Theory Utility

Non-Expected Utility Theories: Weighted Expected, Rank Dependent, and, Cumulative Prospect Theory Utility by

Prospect Theory

Prospect theory is a descriptive theory of how individuals choose among risky alternatives. The theory challenged the conventional wisdom that economic decision makers are rational expected utility maximizers. We present a number of empirical demonstrations that are inconsistent with the classical theory, expected utility, but can be explained by prospect theory. We then discuss the prospect th...

Prospect Theory

Prospect theory (Kahneman & Tversky, 1979) predictions were examined in light of ethnocentrism and intergroup conflict. An experiment conducted at the outset of the 2003 invasion of Iraq by the U.S., U. K. and their allies explored American and British participants’ preferences for certain versus uncertain gains and losses concerning Iraqi, American, and British lives. In four conditions, parti...