Prospect Theory - Deepstash
Prospect Theory

Prospect Theory

Prospect theory is an improved version of the previous utility theory.

Utility is instead based on differences from the reference point.

Humans have, by default, some degree of loss aversion, so the absolute utility of a loss will be perceived as greater than one of an equal gain. A survey found that people would refuse a bet where they would gain $100 with a 50% chance and lose $100 otherwise. In fact, they would not accept until the gain is at least twice as big, depending on their degree of loss aversion.

2.64K

4.86K reads

CURATED FROM

IDEAS CURATED BY

cristianpopa

Full-time AI specialist, part-time reader with ideas

The idea is part of this collection:

What Is Opportunity Cost

Learn more about scienceandnature with this collection

The impact of opportunity cost on personal and professional life

Evaluating the benefits and drawbacks of different choices

Understanding the concept of opportunity cost

Related collections

Read & Learn

20x Faster

without
deepstash

with
deepstash

with

deepstash

Personalized microlearning

100+ Learning Journeys

Access to 200,000+ ideas

Access to the mobile app

Unlimited idea saving

Unlimited history

Unlimited listening to ideas

Downloading & offline access

Supercharge your mind with one idea per day

Enter your email and spend 1 minute every day to learn something new.

Email

I agree to receive email updates