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