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  2. Prospect theory - Wikipedia

    en.wikipedia.org/wiki/Prospect_theory

    To see how prospect theory can be applied, consider the decision to buy insurance. Assume the probability of the insured risk is 1%, the potential loss is $1,000 and the premium is $15. If we apply prospect theory, we first need to set a reference point. This could be the current wealth or the worst case (losing $1,000).

  3. Status quo bias - Wikipedia

    en.wikipedia.org/wiki/Status_quo_bias

    Status quo bias has been attributed to a combination of loss aversion and the endowment effect, two ideas relevant to prospect theory.An individual weighs the potential losses of switching from the status quo more heavily than the potential gains; this is due to the prospect theory value function being steeper in the loss domain. [1]

  4. Reference dependence - Wikipedia

    en.wikipedia.org/wiki/Reference_dependence

    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]

  5. Pseudocertainty effect - Wikipedia

    en.wikipedia.org/wiki/Pseudocertainty_effect

    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.

  6. Certainty effect - Wikipedia

    en.wikipedia.org/wiki/Certainty_effect

    It is an idea introduced in prospect theory. Normally a reduction in the probability of winning a reward (e.g., a reduction from 80% to 20% in the chance of winning a reward) creates a psychological effect such as displeasure to individuals, which leads to the perception of loss from the original probability thus favoring a risk-averse decision.

  7. Theories of political behavior - Wikipedia

    en.wikipedia.org/wiki/Theories_of_political_behavior

    Theories of political behavior, as an aspect of political science, attempt to quantify and explain the influences that define a person's political views, ideology, and levels of political participation, especially in relation to the role of politicians and their impact on public opinion .

  8. Disposition effect - Wikipedia

    en.wikipedia.org/wiki/Disposition_effect

    In 1979, Daniel Kahneman and Amos Tversky traced the cause of the disposition effect to the so-called "prospect theory". [3] The prospect theory proposes that when an individual is presented with two equal choices, one having possible gains and the other with possible losses, the individual is more likely to opt for the former choice even ...

  9. Framing effect (psychology) - Wikipedia

    en.wikipedia.org/wiki/Framing_effect_(psychology)

    Prospect theory posits that a loss is more significant than the equivalent gain, [2] that a sure gain (certainty effect and pseudocertainty effect) is favored over a probabilistic gain, [3] and that a probabilistic loss is preferred to a definite loss. [2]