Advances in Prospect Theory

Tversky, A., & Kahneman, D. (1992). Advances in Prospect Theory: Cumulative Representation of Uncertainty. Journal of Risk and Uncertainty, 5(4), 297-323.

Type

Journal article

Intellectual base

Primary research

Year

1992

DOI

10.1007/bf00122574

Link

https://doi.org/10.1007/BF00122574

Cited from

behavioral_economics, economics_finance

Cited by

4 citations across 4 artifacts.

Each citation links to the sentence it supports in the citing article.

Primes

• Loss Aversion
  • Cumulative prospect theory (Tversky-Kahneman 1992)
• Risk Aversion
  • and its refined version cumulative prospect theory

    This sourceDevelops cumulative prospect theory, using cumulative (rank-dependent) decision weights with separate weighting functions for gains and losses, predicting risk aversion for gains and risk seeking for losses (the four-fold pattern).

Domain-specific

• Cumulative Prospect Theory
  • Tversky and Kahneman introduced this cumulative version in 1992 to handle prospects with many outcomes and to avoid violations of stochastic dominance that affected separable weighting in original prospect theory.
• Probability Weighting Function
  • Small probabilities are often overweighted, middle and high probabilities underweighted, and the transitions from impossibility to possibility or from uncertainty to certainty can receive disproportionate importance

    This sourceTversky and Kahneman's cumulative prospect theory paper, which states the weighting function as a nonlinear transformation of the probability scale that overweights small probabilities and underweights moderate and high ones, with the endpoint behaviour following from diminishing sensitivity relative to impossibility and certainty.

Verification

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