Prospect Theory: Why the Same Outcome Feels Completely Different Depending on How It's Framed
Tversky and Kahneman's 1981 Asian Disease Problem: 72% of subjects chose certain survival of 200 people over a gamble for all 600.
January 2025
November 2024
The Framing Effect: Why the Same Fact Can Produce Opposite Decisions
In Kahneman and Tversky's 1981 experiment, 72% of people chose the option that saved 200 lives.
Loss Aversion: Why Losing $100 Hurts More Than Winning $150
Kahneman and Tversky's 1979 prospect theory established that losses loom roughly 2 to 2.5 times larger than equivalent gains in subjective weight. Most people refuse a coin flip where they win $150 if heads and lose $100 if tails — despite a positive expected value. Loss aversion shapes housing markets, sports decisions, financial portfolios, and why we stay in bad situations far longer than rational calculation would predict.
December 2023
What Is Behavioral Economics? How Psychology Overturned the
Behavioral economics combines psychology and economics to explain how people actually make decisions. This explainer covers prospect theory, loss aversion, nudge theory, cognitive biases, and why the rational actor model was wrong.
November 2022
What Is Behavioral Economics? How Psychology Overturned the Rational Actor
Behavioral economics combines psychology and economics to explain how people actually make decisions.
May 2022
Loss Aversion: Why Losing $100 Hurts More Than Winning $150 Feels Good
Kahneman and Tversky's 1979 prospect theory established that losses loom roughly 2 to 2.5 times larger than equivalent gains in subjective weight.