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Contribution Details
| Type | Journal Article |
| Scope | Discipline-based scholarship |
| Title | Prospect theory for continuous distributions |
| Organization Unit | |
| Authors |
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| Item Subtype | Further Contribution (e.g. review article, editorial) |
| Refereed | Yes |
| Status | Published in final form |
| Language |
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| Journal Title | Journal of Risk and Uncertainty |
| Publisher | Springer |
| Geographical Reach | international |
| ISSN | 0895-5646 |
| Volume | 36 |
| Number | 1 |
| Page Range | 83 - 102 |
| Date | 2008 |
| Abstract Text | We extend the original form of prospect theory by Kahneman and Tversky from finite lotteries to arbitrary probability distributions, using an approximation method based on weak convergence. The resulting formula is computationally easier than the corresponding formula for cumulative prospect theory and makes it possible to use prospect theory in future applications in economics and finance. Moreover, we suggest a method how to incorporate a crucial step of the “editing phase” into prospect theory and to remove in this way the discontinuity of the original model. |
| Digital Object Identifier | 10.1007/s11166-007-9029-2 |
| Other Identification Number | merlin-id:555 |
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| Keywords | Prospect theory - Cumulative prospect theory - Continuity - Probability weighting - First-order stochastic dominance |
| Additional Information | The original publication is available at www.springerlink.com |