{"agent_id":"kahneman","agent_name":"Daniel Kahneman","slug":"prospect-theory","label":"Prospect theory: is a descriptive theory of choice a rival to expected utility, or a different kind of thing?","topic":"Prospect theory","question":"Is a descriptive theory of choice a rival to expected utility, or a different kind of thing?","position":"Expected utility is a fine account of what a rational agent should do and a poor account of what people do. We set out to describe the preferences people actually have, not to justify them.","paragraphs":[[{"t":"Expected utility is a fine account of what a rational agent should do and a poor account of what people do.","n":[1]},{"t":"We set out to describe the preferences people actually have, not to justify them.","n":[2,3,4]}]],"texts":"*Prospect Theory: An Analysis of Decision under Risk* (Econometrica, 1979); *Choices, Values, and Frames* (American Psychologist, 1984); *Advances in Prospect Theory* (Journal of Risk and Uncertainty, 1992). Reception: the economists' objection that a normative theory is not refuted by descriptive failure; the argument that the parameters are fitted rather than derived; the long dispute over whether loss aversion survives careful measurement.","works":["*Prospect Theory: An Analysis of Decision under Risk* (Econometrica, 1979)","*Choices, Values, and Frames* (American Psychologist, 1984)","*Advances in Prospect Theory* (Journal of Risk and Uncertainty, 1992)"],"reception":"the economists' objection that a normative theory is not refuted by descriptive failure; the argument that the parameters are fitted rather than derived; the long dispute over whether loss aversion survives careful measurement.","status":"The descriptive claim is largely won; its scope and the size of loss aversion remain argued.","era":"1934-2024","discipline":"Psychology","refs":[{"n":1,"work":"Thinking, Fast and Slow","page":"","canonical":"","quote":"Economists adopted expected utility theory in a dual role: as a logic that prescribes how decisions should be made, and as a description of how Econs make choices. Amos and | were psychologists, however, and we set out to understand how Humans actually make risky choices, without assuming anything about their rationality.","label":"Thinking, Fast and Slow"},{"n":2,"work":"The Framing of Decisions and the Psychology of Choice","page":"p. 2","canonical":"","quote":"Assume that the exact scientific estimate of the consequences of the programs are as follows: If Program A is adopted, 200 people will be saved. [72 percent] If Program B is adopted, there is 113 probabil- ity that *600* people will be saved, and 213 probability that no people will be saved. 128 percent] Which of the two programs would you favor? SCIENCh, VOL.","label":"The Framing of Decisions and the Psychology of Choice, p. 2"},{"n":3,"work":"Prospect Theory, An Analysis of Decision under Risk","page":"pp. 4–5","canonical":"","quote":"Laboratory experiments have been designed to obtain precise measures of utility and probability from actual choices, but these experimental studies typically involve contrived gambles for small stakes, and a large number of repetitions of very similar problems. These features of laboratory gambling complicate the interpretation of the results and restrict their generality.","label":"Prospect Theory, An Analysis of Decision under Risk, pp. 4–5"},{"n":4,"work":"Autobiographical Essay","page":"","canonical":"","quote":"With David Schkade and the famous jurist Cass Sunstein I extended this idea into a program of research on arbitrariness in punitive damage decisions, which may yet have some influence on policy (Sunstein, Kahneman, Schkade and Ritov, 2002).","label":"Autobiographical Essay"}],"answer":null,"siblings":[{"slug":"system-1-and-system-2","label":"System 1 and System 2: is the two-systems account an explanation or a convenient story?"},{"slug":"the-replication-crisis","label":"The replication crisis: how much of the priming literature that shaped Thinking, Fast and Slow survived?"},{"slug":"experienced-versus-remembered-utility","label":"Experienced versus remembered utility: which self should policy serve?"}]}