behavioral economic
Instructions
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Answer
Prospect Theory and Mental Accounting TheoryProspect theory outlineshow people choose between a given number of probabilistic alternatives which are associated with some risk. Usually, the individuals are aware of the probabilities'outcomes. According to the theory, the decisions people make are influenced by the possible value of gains and losses and not the outcome (Kahneman & Tversky, 1979). In this theory, the central prediction arises from loss-aversion whereby the response to gains is often less intense compared to similar losses. According to Kahneman and Tversky, the choice is a two-phase process. The phases are editing and evaluation in that order. During the editing stage, the expected outcomes of a given decision are listed based on a precise investigation. The editing phase...
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