Cumulative prospect theory was introduced by Tversky and Kahneman so as to combine the empirical realism of their original prospect theory with the theoretical advantages of Quiggin''s rank-dependent utility. Preference axiomatizations were provided in several papers. All those axiomatizations, however, only consider decision under uncertainty. No axiomatization has been provided as yet for decision under risk, i.e., the case in which given probabilities are transformed. Providing the latter is the purpose of this note. The resulting axiomatization is considerably simpler than that for uncertainty.

comonotonicity, prospect theory, rank-dependence, rank-dependent utility, sign-dependence, trade off consistency,
ERIM Article Series (EAS)
Journal of Risk and Uncertainty
Erasmus Research Institute of Management

Chateauneuf, A, & Wakker, P.P. (1999). An Axiomatization of Cumulative Prospect Theory for Decision under Risk. Journal of Risk and Uncertainty, 18(2), 137–145. doi:1007886529870