Additive utility in prospect theory

Han Bleichrodt, Ulrich Schmidt, Horst Zank

Research output: Contribution to journalArticlepeer-review


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, adopted in the theoretical literature on multiattribute utility under prospect theory, is to assume that a decision maker determines whether the complete outcome is a gain or a loss. In this holistic evaluation, decision weighting and loss aversion are general and attribute-independent. Another possibility, more common in the empirical literature, is to assume that a decision maker has a reference point for each attribute. We give preference foundations for this attribute-specific evaluation where decision weighting and loss aversion are depending on the attributes. © 2009 INFORMS.
Original languageEnglish
Pages (from-to)863-873
Number of pages10
Issue number5
Publication statusPublished - May 2009


  • Additive utility
  • Decision weighting
  • Loss aversion
  • Prospect theory


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