Motivation Theory

Motivation theory is a framework for explaining why people initiate, sustain, or change behavior in response to internal needs, desired outcomes, and external incentives. In marketing, it helps connect consumer behavior to goals such as problem solving, identity expression, or social belonging. The mechanism involves perceived needs creating tension or goals, while expected benefits, perceived ability, and situational cues influence whether a person chooses an action and persists with it. Marketers apply motivation theory to segment audiences, frame value propositions, design incentives, and develop messages that align products with consumer priorities. Used critically, it can improve campaign relevance while distinguishing genuine customer needs from assumptions based on simplistic models.

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JoVE Business - Finance

The Prospect Theory

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2026

Prospect theory, developed by Daniel Kahneman and Amos Tversky, explains how individuals make decisions under risk and uncertainty, particularly in the context of investments. Unlike traditional economic theories that assume investors act rationally to maximize utility, prospect theory suggests that people evaluate potential gains and losses relative to a reference point rather than in absolute terms.Loss Aversion and Its Impact on Decision-MakingA central tenet of prospect theory is loss...

Introduction to Game Theory

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2025

Game theory examines how individuals and groups make strategic decisions when the actions of others influence their outcomes. It helps identify the best strategies by considering all participants' potential choices and reactions to the choices of others. This approach is helpful in gaining insights into many competitive situations where understanding the behavior of others can impact decision-making. For example, two retail stores are deciding whether to extend their business hours. If only one...

The Quantity Theory of Money I

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2025

The quantity theory of money is a classic economic model that explains the relationship between money and prices. It considers four elements: the total supply of money, how quickly money circulates, the general level of prices, and the number of transactions taking place. Together, these factors show how changes in money supply can influence the cost of everyday goods and services.Consider a small community where a single ten-dollar note changes hands several times in one day. A customer buys...

Prospect Theory: Isolation Effect

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2025

The isolation effect is integral to prospect theory, which describes how individuals make decisions. It highlights a tendency to concentrate on what distinguishes options rather than what they have in common, resulting in a narrow focus that can lead to inconsistent decision-making. Choices are often inconsistent because they are influenced by how the options are presented. This is because changing the description of the options from gains to losses, or vice versa, changes how people perceive...

Modern Portfolio Theory

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2025

Modern Portfolio Theory (MPT), developed by economist Harry Markowitz in the 1950s, revolutionized investment strategies by optimizing a portfolio's risk and return. The theory emphasizes diversification, suggesting that investors can maximize returns for a given level of risk by carefully combining assets with different risk and return profiles. MPT is based on the idea that individual assets should not be evaluated in isolation but as part of a broader portfolio. The key metric is the...

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