Prospect Theory is a modification of expected utility theory by two psychologists named Daniel Kahneman and Amos Tversky. Kahneman won the 2002 Nobel Prize in Economics for this work - Tversky died before the prize was awarded and the committee does not award prizes posthumously.
- What is the difference between normative and descriptive theories?
- What is framing?
- In what ways does Prospect Theory differ from expected utility theory. Describe each one and say why it is important.
- What is loss aversion? Why is it important?