Asked by
Marianna Bivens
on Dec 18, 2024
Verified
Which of the following is a key part to the elements of prospect theory?
A) People think of gains and losses with respect to some reference point.
B) People are loss averse, meaning that losses count half as much as equivalent gains.
C) People are risk seeking concerning gains and risk averse concerning losses.
D) People tend to undervalue small probabilities.
Prospect Theory
A behavioral economic theory that describes how people choose between probabilistic alternatives that involve risk.
Reference Point
A basis or standard for evaluation, assessment, or comparison; a point of reference.
Loss Averse
The psychological phenomenon where losses are perceived to be more significant than equivalent gains.
- Comprehend the key elements of prospect theory, especially regarding gains, losses, and risk preferences.
Verified Answer
SR
Learning Objectives
- Comprehend the key elements of prospect theory, especially regarding gains, losses, and risk preferences.