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  • Prospect Theory

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    Leonardo
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    Prospect theory proposes an alternative to expected utility theory that dominated economic thought. It suggests people evaluate choices based on potential gains and losses rather than final outcomes. Kahneman and Tversky introduced prospect theory with a value function and weighting function to replace the utility function and probabilities in expected utility theory.

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    Prospect-Theory

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    Prospect-Theory

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    Prospect theory proposes an alternative to expected utility theory that dominated economic thought. It suggests people evaluate choices based on potential gains and losses rather than final outcomes. Kahneman and Tversky introduced prospect theory with a value function and weighting function to replace the utility function and probabilities in expected utility theory.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    9 views4 pages

    Prospect Theory

    Uploaded by

    Leonardo
    Prospect theory proposes an alternative to expected utility theory that dominated economic thought. It suggests people evaluate choices based on potential gains and losses rather than final outcomes. Kahneman and Tversky introduced prospect theory with a value function and weighting function to replace the utility function and probabilities in expected utility theory.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 4

    I.

    Prospect Theory
    Prospect Theory
    • Kahneman and Tversky, Econometrica 1979
    • Two elements, value function and weighting function
    • Elements replace utility function and probabilities in
    expected utility theory which has dominated economic
    thought
    Prospect Theory Value Function
    Prospect Theory
    Weighting
    Function

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