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Science Experiments

Psychology

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Cognitive Psychology

How People Judge Gains and Losses

Description

Prospect theory explains how people judge gains and losses when they make economic choices. It shows that the value of money is subjective, not fixed. This idea came from the work of Daniel Kahneman and Amos Tversky in the early 1970s.

For many years, economists assumed that a dollar had a market...

Transcript

"Prospect Theory" was devised by Daniel Kahneman and Amos Tversky, beginning in the 1970s, as a way to describe how people psychologically value currency.

On one hand, any unit of currency-like the US dollar-has an objective value, determined by the market. If a person is preparing to travel abroad and exchanging currency, it is this objec...

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