prospektteorin

Prospektteorin, often translated as Prospect Theory, is a descriptive model of decision-making under risk developed by psychologists Daniel Kahneman and Amos Tversky. It offers an alternative to traditional expected utility theory, which assumes individuals make rational choices to maximize their wealth. Prospect theory proposes that people make decisions based on perceived gains and losses relative to a reference point, rather than on absolute outcomes.

A key element of prospect theory is the value function, which is concave for gains and convex for losses. This means that individuals are risk-averse when facing potential gains, preferring a certain gain over a gamble with an equal expected value. Conversely, they are risk-seeking when facing potential losses, often choosing a gamble that might result in a larger loss over a certain smaller loss.

Another crucial aspect is probability weighting. Prospect theory suggests that people overweight small probabilities and underweight moderate to high probabilities. This explains phenomena like the certainty effect, where people disproportionately prefer outcomes that are certain over those that are merely probable, even if the expected value is lower.

Prospect theory has significant implications for understanding economic behavior, marketing, and public policy. It helps explain seemingly irrational choices, such as why people buy lottery tickets or purchase insurance, and provides insights into how framing of choices can influence decision-making. The theory has been influential in the development of behavioral economics.