Affective-Cognitive Prospect Theory: An Integrative Psychological-Economic Model of Decision-Making under Uncertainty

Dmitry Yagudin^1,*
1Doctor of Psychology, CEO of the D.R. Yagudin International NeuroUniversity, and Chairman of the Board of the Unity NGO, Russia
Email: dr.yagudin@mail.ru

Abstract

Standard models of decision-making under uncertainty, from expected utility theory to cumulative prospect theory, treat risk preferences as fixed individual traits. Yet a substantial psychological literature shows that risk-relevant preferences shift systematically with the decision-maker’s momentary internal state: affective arousal amplifies loss aversion, while cognitive load and time pressure push judgment toward heuristic, more distorted probability processing. This paper proposes Affective-Cognitive Prospect Theory (ACPT), a state-dependent extension of cumulative prospect theory in which the loss-aversion coefficient is an increasing function of affective arousal and the curvature of the probability-weighting function is a decreasing function of cognitive load, each grounded in an established psychological literature.

Keywords: Decision-making under uncertainty; Prospect theory; Loss aversion; Probability weighting; Affect; Cognitive load; Behavioral economics; Risk premium