Search results
Results from the WOW.Com Content Network
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 .
A raster version of this image is available. It should be used in place of this vector image when superior. It should be used in place of this vector image when superior. File:Prospect Theory Graph.svg → File:Value function in Prospect Theory Graph.jpg
The main modification to prospect theory is that, as in rank-dependent expected utility theory, cumulative probabilities are transformed, rather than the probabilities themselves. This leads to the aforementioned overweighting of extreme events which occur with small probability, rather than to an overweighting of all small probability events.
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.
Main page; Contents; Current events; Random article; About Wikipedia; Contact us
Main page; Contents; Current events; Random article; About Wikipedia; Contact us; Pages for logged out editors learn more
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]
Gain and loss are defined in the scenario as descriptions of outcomes, for example, lives lost or saved, patients treated or not treated, monetary gains or losses. [ 2 ] 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 ...