Prospect Theory

AnProspect Theory is an attempt by Amos Tversky and Daniel Kahneman to construct a decision theory that describes the actual behavior of humans, rather than idealized rational decision-making.

• Shane Legg on prospect theory and computational finance by Roko
• Prospect Theory: A Framework for Understanding Cognitive Biases by Yvain

An agent based onagent, in prospect theory:

• is loss-averse, and so weighs losses (relative to some reference point) more strongly than gains
• is risk-averse with respect to gains, but risk-seeking with respect to losses
• uses probability weighting:weighting: small probabilities count more and larger probabilities count less than they would under expected utility.

External links

• Prospect theory at Psychology Wiki

• Heuristics and biases
• Loss aversion
• Decision theory
• Expected utility

• Shane Legg on prospect theory and computational finance by Roko
• Prospect Theory: A Framework for Understanding Cognitive Biases by Yvain

See also

• Heuristics and biases
• Decision theory
• Expected utility

See also

• Heuristics and biases
• Decision theory
• Expected utility

An attempt by Amos Tversky and Daniel Kahneman to makeconstruct a decision theory less rational, but more realistic as a descriptionthat describes the actual behavior of humans, rather than ordinaryidealized expected utilityrational. decision-making.

• decisionHeuristics and biases
• Decision theory
• expectedExpected utility

Blog posts

• Shane Legg on prospect theory and computational finance by Roko

An attempt by Amos Tversky and Daniel Kahneman to make decision theory less rational, but more realistic as a description of humans, than ordinary expected utility.

An agent based on prospect theory:

• is loss-averse, and so weighs losses (relative to some reference point) more strongly than gains
• is risk-averse with respect to gains, but risk-seeking with respect to losses
• uses probability weighting: small probabilities count more and larger probabilities count less than they would under expected utility.

See also

• decision theory
• expected utility