SOLVING THE DISCRETE MULTIPLE CRITERIA PROBLEM USING LINEAR PROSPECT-THEORY

Prospect theory developed by Kahneman and Tversky is a popular model o f choice in decision problems under uncertainty. Prospect theory has r ecently been extended to multiple criteria choice problems. In this pa per, an interactive method for solving discrete multiple criteria deci sion problems, based on prospect theory type value functions, has been developed. Piecewise linear marginal value functions are assumed to a pproximate the S-shaped value functions of prospect theory. Therefore, the proposed procedure is valid only for convex preferences.