Prospect Theory is a behavioral economic theory that describes how individuals make decisions under risk and uncertainty. Developed by psychologists Daniel Kahneman and Amos Tversky in 1979, the theory challenges the traditional utility theory, which assumes that people behave rationally and make decisions solely based on maximizing their expected utility. Key features of Prospect Theory include: 1. **Value Function**: The theory posits that people perceive gains and losses differently.
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