Kahneman and tversky 1979 1981 have shown that some

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Kahneman and Tversky (1979, 1981) have shown that some people’s choices vary with circumstances. They treat gains and losses differently even though they are of the same magnitude. 48
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Prospect Theory People are more Value Gains People are more averse to losses. For example, the loss in value from $1 loss is value from $1 loss is higher than gain in value from $1 gain. Both gains and losses of a given size (e.g., $1) at the Losses lower levels are highly valued than at the higher levels. 49
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Quiz Prospect theory implies that the way a decision under Prospect theory implies that the way a decision under uncertainty is framed affects the result because: a) Framing can change the decision-maker’s Framing can change the decision maker s perspective on a potential loss to a potential gain. b) Most people are risk-averse over potential gains but risk-neutral over potential losses. c) Most people are overconfident when assessing probabilities. d) All of the above. 50
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Quiz Prospect theory implies that the way a decision under Prospect theory implies that the way a decision under uncertainty is framed affects the result because: a) Framing can change the decision-maker’s Framing can change the decision maker s perspective on a potential loss to a potential gain. b) Most people are risk-averse over potential gains but risk-neutral over potential losses. c) Most people are overconfident when assessing probabilities. d) All of the above. 51
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