Program for Calculating the
Cumulative-Prospect-Theory Value

of Prospects with at Most Four
Outcomes

The program calculates the value of prospects with no more than four outcomes under cumulative prospect theory (PT), the theory introduced by T&K:

Tversky, Amos & Daniel Kahneman (1992) "Advances in Prospect Theory:
Cumulative Representation of Uncertainty," *Journal of Risk and Uncertainty* 5,
297-323.

The weighting function for gains is: The weighting function for losses is:

The loss aversion parameter is λ .

The value function (including loss aversion) is:

with functions f(x) and g(x) as follows:

written by Veronika Köbberling, November 2002