Original and cumulative prospect theory: a discussion of empirical differences

✍ Scribed by Hein Fennema; Peter Wakker

• Publisher: John Wiley and Sons
• Year: 1997
• Tongue: English
• Weight: 194 KB
• Volume: 10
• Category: Article
• ISSN: 0894-3257
• DOI: 10.1002/(sici)1099-0771(199703)10:1<53::aid-bdm245>3.0.co;2-1

✦ Synopsis

This paper discusses dierences between prospect theory and cumulative prospect theory. It shows that cumulative prospect theory is not merely a formal correction of some theoretical problems in prospect theory, but it also gives dierent predictions. Some experiments by Lola Lopes are re-analyzed, and are demonstrated to favor cumulative prospect theory over prospect theory. It turns out that the mathematical form of cumulative prospect theory is well suited for modeling the psychological phenomenon of diminishing sensitivity. *