A Quick Read on Prospect Theory and Loss Aversion
DECEMBER 18, 2019
Prospect Theory or the loss-aversion theory in behavioral economics and behavioral finance, aims to determine people’s decision making and their tendency for loss aversion. What is Prospect Theory and Loss Aversion? In 1979, Daniel Kahneman and Amos Tversky came up with the Prospect Theory. The Prospect Theory aims to explain how people choose between different prospects and how they choose the probability of each prospect to avert losses.