prospect theory

E129165
behavioral economic theory decision-making theory theory of choice under risk

Prospect theory is a behavioral economic framework that explains how people actually make decisions under risk and uncertainty, highlighting systematic deviations from the predictions of classical expected utility theory.

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All labels observed (4)

Label Occurrences
prospect theory canonical 4
cumulative prospect theory 2
Prospect Theory: An Analysis of Decision under Risk 1

Statements (51)

Predicate Object
instanceOf behavioral economic theory ⓘ
decision-making theory ⓘ
theory of choice under risk ⓘ
addresses Allais paradox ⓘ
St. Petersburg paradox qualitatively ⓘ
assumes outcomes are evaluated as gains or losses relative to a reference point ⓘ
basisFor prospect theory self-linksurface differs ⓘ
surface form: cumulative prospect theory
contrastsWith expected utility theory (with John von Neumann) ⓘ
surface form: expected utility theory
coreConcept diminishing sensitivity ⓘ
loss aversion ⓘ
probability weighting ⓘ
reference dependence ⓘ
criticizesAssumption linear probability weighting ⓘ
outcome evaluation in terms of final wealth levels ⓘ
perfect rationality ⓘ
developedBy Amos Tversky ⓘ
Daniel Kahneman (honorary doctorate, not student) ⓘ
surface form: Daniel Kahneman
empiricalSupport field studies ⓘ
laboratory experiments ⓘ
explains decision-making under risk ⓘ
decision-making under uncertainty ⓘ
systematic deviations from expected utility ⓘ
extendedBy prospect theory self-linksurface differs ⓘ
surface form: cumulative prospect theory
field behavioral economics ⓘ
psychology ⓘ
includesComponent probability weighting function ⓘ
value function ⓘ
influenced behavioral economics ⓘ
surface form: behavioral finance

health economics ⓘ
insurance demand modeling ⓘ
marketing ⓘ
public policy design ⓘ
predicts endowment effect ⓘ
framing effects ⓘ
preference reversals ⓘ
reflection effect ⓘ
risk aversion over gains ⓘ
risk seeking over losses ⓘ
status quo bias ⓘ
probabilityWeightingProperty overweights small probabilities ⓘ
underweights moderate and large probabilities ⓘ
publicationYear 1979 ⓘ
publishedIn Econometrica ⓘ
states losses loom larger than gains of equal magnitude ⓘ
titleOfSeminalPaper prospect theory self-linksurface differs ⓘ
surface form: Prospect Theory: An Analysis of Decision under Risk
usedFor explaining insurance purchase decisions ⓘ
explaining lottery participation ⓘ
modeling investor behavior ⓘ
valueFunctionProperty steeper for losses than for gains ⓘ
valueFunctionShape concave over gains ⓘ
convex over losses ⓘ

Referenced by (8)

Full triples — surface form annotated when it differs from this entity's canonical label.

expected utility theory (with John von Neumann) → criticizedBy → prospect theory ⓘ
subject surface form: expected utility theory
prospect theory → titleOfSeminalPaper → prospect theory self-linksurface differs ⓘ
subject surface form: Prospect theory
this entity surface form: Prospect Theory: An Analysis of Decision under Risk
prospect theory → basisFor → prospect theory self-linksurface differs ⓘ
subject surface form: Prospect theory
this entity surface form: cumulative prospect theory
prospect theory → extendedBy → prospect theory self-linksurface differs ⓘ
subject surface form: Prospect theory
this entity surface form: cumulative prospect theory
Daniel Kahneman (honorary doctorate, not student) → notableWork → prospect theory ⓘ
subject surface form: Daniel Kahneman
this entity surface form: Prospect theory
Daniel Kahneman (honorary doctorate, not student) → knownFor → prospect theory ⓘ
subject surface form: Daniel Kahneman
behavioral economics → studies → prospect theory ⓘ
behavioral economics → hasKeyConcept → prospect theory ⓘ