This theory contradicts the belief that people process the net effect of gains and losses, and argues instead that gains and losses are valued differently.
Thirteen years after the development of this concept, its originators put forth its cumulative version that corrected a violation of first order stochastic dominance. Chapter 16 of Peter Bernstein's Against the Gods discusses the formation and development of this theory, which is often represented by a graph that rapidly increases in the fourth quadrant but flattens out in the first quadrant. One example of this concept, which can be avoided by hedonic framing, is the disposition effect, which occurs when investors tend to sell assets that have appreciated but hold those that have depreciated. This theory contradicts the belief that people process the net effect of gains and losses, and argues instead that gains and losses are valued differently. For 10 points, name this theory from behavioral economics about the assessment of risk, developed by Amos Tversky and Daniel Kahneman.
Thirteen years after the development of this concept, its originators put forth its cumulative version that corrected a violation of first order stochastic dominance.
prospect theory