Cumulative Prospect Theory
A behavioral decision theory proposed by Tversky and Kahneman that describes human risk decision-making under uncertainty using a probability weighting function and a value function. It posits different risk attitudes toward gains and losses.
Timeline (last 90 days)
Cumulative Prospect Theory (CPT) was proposed by Tversky and Kahneman in 1992 as an improvement on the original prospect theory, used to describe human risky decision-making under uncertainty.
The core of CPT consists of two points: the probability weighting function (assigning excessive weight to small-probability events and insufficient weight to medium- and high-probability events) and the value function (defining gain and loss utility relative to a reference point, with a steeper loss region, and risk aversion in the gain region and risk seeking in the loss region).
CPT utility is a nonlinear functional of the reward distribution, not a linear expectation of reward, which breaks the linear additivity of expectation that traditional optimistic algorithms rely on.
All Facts (3)
Cumulative Prospect Theory (CPT) was proposed by Tversky and Kahneman in 1992 as an improvement on the original prospect theory, used to describe human risky decision-making under uncertainty.
50%UnverifiedThe core of CPT consists of two points: the probability weighting function (assigning excessive weight to small-probability events and insufficient weight to medium- and high-probability events) and the value function (defining gain and loss utility relative to a reference point, with a steeper loss region, and risk aversion in the gain region and risk seeking in the loss region).
50%UnverifiedCPT utility is a nonlinear functional of the reward distribution, not a linear expectation of reward, which breaks the linear additivity of expectation that traditional optimistic algorithms rely on.
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