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Prospect theory is a theory of behavioral economics, judgment and decision making that was developed by Daniel Kahneman and Amos Tversky in 1979. [1] The theory was cited in the decision to award Kahneman the 2002 Nobel Memorial Prize in Economics .
The Nolan Chart in its traditional form. The Nolan Chart is a political spectrum diagram created by American libertarian activist David Nolan in 1969, charting political views along two axes, representing economic freedom and personal freedom.
Prospect theory and loss aversion suggests that most people would choose option B as they prefer the guaranteed $920 since there is a probability of winning $0, even though it is only 1%. This demonstrates that people think in terms of expected utility relative to a reference point (i.e. current wealth) as opposed to absolute payoffs.
26 charts that helped explain 2024 in politics. The year 2024 was one for the history books, and 538's visual journalists and reporters were hard at work explaining the data behind the news with ...
In prospect theory, the pseudocertainty effect is the tendency for people to perceive an outcome as certain while it is actually uncertain in multi-stage decision making. The evaluation of the certainty of the outcome in a previous stage of decisions is disregarded when selecting an option in subsequent stages.
The term is named after the American policy analyst and former senior vice president at Mackinac Center for Public Policy, Joseph Overton, who proposed that the political viability of an idea depends mainly on whether it falls within an acceptability range, rather than on the individual preferences of politicians using the term or concept.
Reference dependence is a central principle in prospect theory and behavioral economics generally. It holds that people evaluate outcomes and express preferences relative to an existing reference point, or status quo. It is related to loss aversion and the endowment effect. [1] [2]
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