  Cumulative Prospect Theory (CPT) is a modeling tool widely used in behavioral
economics and cognitive psychology that captures subjective decision making of
individuals under risk or uncertainty. In this paper, we propose a dynamic
pricing strategy for Shared Mobility on Demand Services (SMoDSs) using a
passenger behavioral model based on CPT. This dynamic pricing strategy together
with dynamic routing via a constrained optimization algorithm that we have
developed earlier, provide a complete solution customized for SMoDS of
multi-passenger transportation. The basic principles of CPT and the derivation
of the passenger behavioral model in the SMoDS context are described in detail.
The implications of CPT on dynamic pricing of the SMoDS are delineated using
computational experiments involving passenger preferences. These implications
include interpretation of the classic fourfold pattern of risk attitudes,
strong risk aversion over mixed prospects, and behavioral preferences of self
reference. Overall, it is argued that the use of the CPT framework corresponds
to a crucial building block in designing socio-technical systems by allowing
quantification of subjective decision making under risk or uncertainty that is
perceived to be otherwise qualitative.
