Prospect Theory or Let’s Teach People to Walk
Prospect theory examines human decision-making under conditions of risk and uncertainty. This behavioral theory focuses on how people perceive and evaluate different options and make decisions based on these perceptions. The headline “Prospect theory, or let’s teach people to walk” might seem humorous, but it is not. According to prospect theory, people do not solely rely on rational decision-making based on expected value and outcome probabilities. Instead, their decisions are influenced by emotions, perception of gains and losses, and relative changes in status. The theory emphasizes that people tend to be more sensitive to losses … Read more