# [[Prospect theory]] ![[Prospect theory.svg]] Prospect theory is an [[Economics|economic]] theory proposed by [[Daniel Kahneman]] and [[Amos Tversky]] about how people make decisions when faced with risk and uncertainty. It states that people determine which of two possible outcomes is preferrable not by evaluating each outcome separately but by evaluating how well they perform *relative to each other*. Prospect theory says that we look at things in terms of gains and losses relative to other options and that we're more sensitive to losses than gains. That is, we have [[Loss aversion]]: the possibility of losing something is more painful to us than the possibility of gaining another. %% # Excalidraw Data ## Text Elements ## Embedded Files 4b965087a64bb9250f1a05c928f5d08fdc6c2c4d: [[icon-prospect-comparison.png]] ## Drawing ```compressed-json N4KAkARALgngDgUwgLgAQQQDwMYEMA2AlgCYBOuA7hADTgQBuCpAzoQPYB2KqATLZMzYBXUtiRoIACyhQ4zZAHoFAc0JRJQgEYA6bGwC2CgF7N6hbEcK4OCtptbErHALRY8RMpWdx8Q1TdIEfARcZgRmBShcZQUebQBGADYEmjoghH0EDihmbgBtcDBQMBKIEm4IAE0KAFUAEQB2bAAhABl6AAUADgoAVgBxUgB9TAAxAEFW/FSSyFhECsJ9aKR+ UsxuZ3iGru0ABkTEgGYG3oajngAWHniurrXIGE2jy73tI8TLs66rhr2/o4PCAUEjqbivXpAyQIQjKaTgvaQwqQazKYLcPZA5hQUhsADWCAAwmx8GxSBUcdZmHBcIFsjNSppcNg8cpcUIOMRiaTyRJKRxqbSslAGZAAGaEfD4ADKsHREkEHlFEGxuIJAHVQZJuHxkSqcfiELKYPL0IrykD2XCOOFcmh4kC2DTsGonva9pi9WzhHAAJLEO2oPIAXSB YvImX93A4QilQMInKwFVw8WV7M5NuYgZjcb1YQQxG42wa2y6R3ivUSQMYLHYXDQl2rTFYnAAcpwxEWGokeL1ensAJy62ZlZh1dJQAvcMUEMJAzTCTkAUWCmWy2dj+CBQjgxFwk8L9tOA66iUHF0SZyBRA4eOjm+vbBZU7QM/wc7zUSgQkDEEQnITZRlQlYIowkS5NAHS89i6BpcE+TRIN7PYxXiXBEWwIcujFXpiBgsViGwRJsB4bBLkLLF3HEIN kTAB1aPiZFQz1bBcTge8pUKABfcBmJROA4FlfdqOKOZoUyCoiDhEU1gYQgEAoZpmVZdMuRJMkKgAYjFHTdIZCBsBEOkoF9Sd9FlNUiXU3l0E0+IEHs+z9MM0hjNMjIlJZb0OTUnkKXIAUaWM5yjOFdz9FGSUZTlaiVRJC1CgM0LsnCizDU1YgwTQYdIBctyzLSgljVNOKlVkvKwrMgAlYRrVtItyuSkyzIAeWdV0iw9RrXMqjJRk4KBRlwfRJTdV BG0SiqUrM/rsmlQgjGonhPVKKbmoyAAVLAoHGKT63QYIxRkyamtSqJSB21y2AoaFcEPVAcy3E6eumjIl05cYrpukJ7ogWlcSobr8oyT6AY2+BYtUkKXvWiKIwQGrTUe2TmFYkl8AADW4I4fn2RFbgaE8fi6eJexRtGpUqBFem0O4bkueJGYuEmycSow2AMbhRMgegCCEajGJKLigd6/Qap8zNfyh2S2RIebFp1FbIFl4hZQQdi0CRUoVYAWTYYgE He3BNGCe63w/bXSBIbkNLQbmIGaElftIZQmQAChuBpqF4bZvc9723l6ABKZUqoQZRY1pCoXfdngjkxXh479pPUEDkPuJFuaDQJNqoDrDdc1KcNhoRrIDatjggLtvUsmN03uBxfmgWwIgNdQRuECBDgS4b0gm71YQoBvaiO6BZZSAJUhWx7tBR71cfJ6Nk2X3bvuEAzxK7AAKwQbAcmlbu4D1g2l/r19Z07xLmTzxgNo56Zq5HeZYrCYI97rZVDOx AxwYWNBkb1KSZ8ZsL5hlxOZdI79ODTlAYA0IO13633vhxfA3FwDCzoCBcIXMeJcSAA== ``` %%