Prospect Theory (Kahneman & Tversky)

Details

Photo

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Name

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Field

Behavioral economics

Core idea

People value gains and losses relative to a reference point, with loss aversion and weird probability weighting.

Year

1979

How dense

High – lots of experiments and function shapes.

My take

This is the “humans are not expected-utility robots” manifesto. After this, every risky choice your friends make looks like a lab experiment.