This article introduces a new version of prospect theory called cumulative prospect theory, which employs cumulative decision weights rather than separable weights. This extension allows the theory to handle uncertain and risky prospects with any number of outcomes and permits different weighting functions for gains and losses. The authors invoke two principles—diminishing sensitivity and loss aversion—to explain the curvature of the value function and weighting functions. The theory confirms a fourfold pattern of risk attitudes: risk aversion for gains and risk seeking for high-probability losses, and risk seeking for gains and risk aversion for low-probability losses. The article reviews experimental evidence and a new experiment to support these findings. It also discusses five major phenomena of choice that violate the standard model, including framing effects, nonlinear preferences, source dependence, risk seeking, and loss aversion.This article introduces a new version of prospect theory called cumulative prospect theory, which employs cumulative decision weights rather than separable weights. This extension allows the theory to handle uncertain and risky prospects with any number of outcomes and permits different weighting functions for gains and losses. The authors invoke two principles—diminishing sensitivity and loss aversion—to explain the curvature of the value function and weighting functions. The theory confirms a fourfold pattern of risk attitudes: risk aversion for gains and risk seeking for high-probability losses, and risk seeking for gains and risk aversion for low-probability losses. The article reviews experimental evidence and a new experiment to support these findings. It also discusses five major phenomena of choice that violate the standard model, including framing effects, nonlinear preferences, source dependence, risk seeking, and loss aversion.