Economics, Econometrics and Finance
4 years ago

Cumulative Prospect Theory: A Game-Changer in Economic Decision-Making!

MPRA Paper
Is Cumulative Prospect Theory a Serious Alternative for the Expected Utility Paradigm
Michał Lewandowski

Paper Summary

The article shows that Cumulative Prospect Theory is a serious alternative to Expected Utility Theory. It doesn't go against Expected Utility, but includes it as a special case. Expected Utility is simple and flexible, but doesn't capture all real-life choice behaviors.

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