The present paper combines loss attitudes and linear utility by providing an axiomatic analysis of cumulative prospect theory in the framework for decision under uncertainty. We derive a two-sided variant of Choquet expected utility with possibly different capacities for gains and for losses, and linear utility. Naturally, utility may have a kink at the status quo, which allows for the exhibition of loss aversion. The central condition of our model is termed independence of common increments.
- comonotonic sure thing principle
- cumulative prospect theory
- linear utility
- loss aversion