A simple model of cumulative prospect theory

Ulrich Schmidt, Horst Zank

Research output: Contribution to journalArticlepeer-review


The present paper combines loss attitudes and linear utility by providing an axiomatic analysis of cumulative prospect theory (CPT) in the framework for decision under uncertainty. We derive a two-sided variant of Choquet expected utility (CEU) with possibly different capacities for gains and for losses, and linear utility. Naturally, utility may have a kink at the status quo, which allows for the exhibition of loss aversion. The central condition of our model is termed independence of common increments. © 2008 Elsevier B.V. All rights reserved.
Original languageEnglish
Pages (from-to)308-319
Number of pages11
JournalJournal of Mathematical Economics
Issue number3-4
Publication statusPublished - 20 Mar 2009


  • Comonotonic sure-thing principle
  • Cumulative prospect theory
  • Linear utility
  • Loss aversion


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