What are the main points of prospect theory, What is the main point of prospect theory.

update time: 2023-12-01 12:16:29 editor: Mantey Emotion

Scenario theory is an academic theory that explains how we make decisions and evaluate risks. The theory has three main points.

What are the main points of prospect theory, What is the main point of prospect theory.

the first view is that "people tend to avoid losses", which means that when people choose, they will consider what they may lose, not just what they may gain. For example, if you tell someone that they have a 50% chance of getting $100, they may not be too excited about it. However, if you tell them that they have a 50% chance of losing $100, they may become very worried and try to avoid the risk.

the second view is that "people's emotional reactions to the same amount of gains and losses are not equal", which shows that people are more likely to feel sad or painful because of losses, rather than happy or satisfied because of the same amount of gains. For example, if you give a person $100, they may not feel too excited. However, if you take $100 away from another person, they may feel very lost.

the third view is that "people's evaluation is relative rather than absolute", which shows that people do not evaluate risks and benefits according to the facts themselves, but compare with other options. For example, if you tell a person that they can earn a 10% return, they may think it is very good. However, if you tell them that other investment options will get a return of 15%, they may think it is not so good.

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Scene theory tells us that people are not completely rational decision makers, but are influenced by emotions and surrounding environment. Understanding these viewpoints can help us better understand how people make decisions and help us better assess risks.

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