Multi-attribute Decision Making Under Risk Based on Third-Generation Prospect Theory

A method of multi-attribute decision making under risk MADMUR based on third-generation prospect theory PT3 is presented to solve the decision making problems by allowing reference points of each attribute to be uncertain. First, some important properties of PT3 are defined. Second, the adaptation of uncertain reference point is represented specifically. Then, the MADMUR method and its relevant computing steps are illustrated including all required definitions of MADMUR, an psychological inference procedure with relative value function and relative cumulative decision weighting function, and ranking and ordering decision alternatives etc. Finally, an illustrative example is given to show this decision making method in detail.

[1]  A. Tversky,et al.  Prospect theory: an analysis of decision under risk — Source link , 2007 .

[2]  R. Sugden,et al.  Regret Theory: An alternative theory of rational choice under uncertainty Review of Economic Studies , 1982 .

[3]  L. J. Savage,et al.  The Foundations of Statistics , 1955 .

[4]  Wang Zuo-jun,et al.  Integrative Model or the Priority Heuristic? A Test from the Point of View of the Equate-to-Differentiate Model , 2010 .

[5]  R. Sugden,et al.  Third-generation prospect theory , 2008 .

[6]  M. Birnbaum,et al.  New Paradoxes of Risky Decision Making , 2022 .

[7]  J. Quiggin.  A theory of anticipated utility , 1982 .

[8]  M. Machina.  "Expected Utility" Analysis without the Independence Axiom , 1982 .

[9]  Robert Sugden,et al.  Reference-dependent subjective expected utility , 2003, J. Econ. Theory.

[10]  Terence Connolly,et al.  Multiple reference points in satisfaction and fairness assessment , 2000 .

[11]  W. Edwards.  The theory of decision making. , 1954, Psychological bulletin.

[12]  A. Tversky,et al.  Prospect Theory : An Analysis of Decision under Risk Author ( s ) : , 2007 .

[13]  A. Tversky,et al.  Advances in prospect theory: Cumulative representation of uncertainty , 1992 .

[14]  David E. Bell,et al.  Regret in Decision Making under Uncertainty , 1982, Oper. Res..

[15]  Michael Schulte-Mecklenbeck,et al.  Process Models Deserve Process Data: Comment on Brandstatter, Gigerenzer, and Hertwig (2006) , 2008, Psychological review.

[16]  J. Neumann,et al.  Theory of games and economic behavior , 1945, 100 Years of Math Milestones.