Prospect Theory. An Analysis of Decision Making Under Risk
DECISIONS AND DESIGNS INC MCLEAN VA
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The theoretical basis of decision analysis is utility theory, which describes the principles upon which people wish to base their decisions. This article questions the validity of utility theory and offers an alternative, prospect theory. In addition to providing evidence in support of prospect theory, this paper discusses its implications for the theory and practice of decision analysis. It suggests, for example, ways in which subtle changes in elicitation procedure can have marked effects on peoples expressed values.