Article ID: | iaor19972020 |
Country: | Netherlands |
Volume: | 72 |
Issue: | 1 |
Start Page Number: | 146 |
End Page Number: | 154 |
Publication Date: | Jan 1994 |
Journal: | European Journal of Operational Research |
Authors: | Salminen Pekka |
Keywords: | prospect theory |
Prospect theory developed by Kahneman and Tversky is a popular model of choice in decision problems under uncertainty. Prospect theory has recently been extended to multiple criteria choice problems. In this paper, an interactive method for solving discrete multiple criteria decision problems, based on prospect theory type value functions, has been developed. Piecewise linear marginal value functions are assumed to approximate the S-shaped value functions of prospect theory. Therefore, the proposed procedure is valid only for convex preferences.