Amos Tversky and Daniel Kahneman propose cumulative prospect theory, a new version of prospect theory that uses cumulative decision weights and extends the theory. This theory applies to both risky and uncertain prospects with any number of outcomes and allows different weighting functions for gains and losses. The theory is based on two principles: diminishing sensitivity and loss aversion, which explain the curvature of the value function and the weighting functions. Experimental evidence and a new experiment confirm a distinctive fourfold pattern of risk attitudes: risk aversion for gains and risk seeking for losses of high probability; risk seeking for gains and risk aversion for losses of low probability. Expected utility theory, once dominant in decision-making under uncertainty, has been challenged by empirical evidence showing that decision makers systematically violate its basic tenets. Prospect theory, introduced by Kahneman and Tversky, explained these violations in choices between risky prospects with a small number of outcomes. The key elements of prospect theory are a value function that is concave for gains, convex for losses, and steeper for losses than for gains, and a nonlinear transformation of the probability scale that overweights small probabilities and underweights moderate and high probabilities. Cumulative prospect theory incorporates the cumulative functional, which transforms cumulative rather than individual probabilities. This model combines features of both developments and provides a unified treatment of risk and uncertainty. It gives rise to different evaluations of gains and losses, which are not distinguished in the standard cumulative model. The theory accounts for five major phenomena of choice: framing effects, nonlinear preferences, source dependence, risk seeking, and loss aversion. These phenomena challenge the standard model and require any adequate descriptive theory of choice to address.Amos Tversky and Daniel Kahneman propose cumulative prospect theory, a new version of prospect theory that uses cumulative decision weights and extends the theory. This theory applies to both risky and uncertain prospects with any number of outcomes and allows different weighting functions for gains and losses. The theory is based on two principles: diminishing sensitivity and loss aversion, which explain the curvature of the value function and the weighting functions. Experimental evidence and a new experiment confirm a distinctive fourfold pattern of risk attitudes: risk aversion for gains and risk seeking for losses of high probability; risk seeking for gains and risk aversion for losses of low probability. Expected utility theory, once dominant in decision-making under uncertainty, has been challenged by empirical evidence showing that decision makers systematically violate its basic tenets. Prospect theory, introduced by Kahneman and Tversky, explained these violations in choices between risky prospects with a small number of outcomes. The key elements of prospect theory are a value function that is concave for gains, convex for losses, and steeper for losses than for gains, and a nonlinear transformation of the probability scale that overweights small probabilities and underweights moderate and high probabilities. Cumulative prospect theory incorporates the cumulative functional, which transforms cumulative rather than individual probabilities. This model combines features of both developments and provides a unified treatment of risk and uncertainty. It gives rise to different evaluations of gains and losses, which are not distinguished in the standard cumulative model. The theory accounts for five major phenomena of choice: framing effects, nonlinear preferences, source dependence, risk seeking, and loss aversion. These phenomena challenge the standard model and require any adequate descriptive theory of choice to address.