The Prospect Theory, A Behavioral Economic Theory

The Prospect Theory, A Behavioral Economic Theory
Prospect theory is a Behavioural Economics Theory which tries to understand how people take
decisions in terms of two alternatives, which have a probabilistic nature. These decision making
processes and their respective outcomes also involve risk. An important point of the Prospect Theory
is that it considers the fact that the outcomes of the alternatives are known. The basic idea behind the
theory is that people base their decisions on potential gains and losses, rather than thinking about the
final outcome. The theory is of the idea that people make such decisions about gains and losses with
the help of heuristics. The theory has been very critical in its application as it tries to bring forth a
model which is much more realistic in nature, ... Show more content on Helpwriting.net ...
In the equation, xi refers to the total number of possible outcomes and pi shows the probability of
those respective outcomes. In the equation w is referred to as the weighing function for the
probabilities which therefore shows that people tend to overreact to certain situations of smaller
probability as compared to larger probabilities.
MAJOR FEATURES
1) The coefficients of values are just gains and losses which are not to be confused with final wealth.
2) The model is able to represent greater sensitivity towards losses as compared to gains.
3) The function is convex for losses that would occur out of the possible outcomes and concave for
any sort of gain.
4) Weighing function helps to overweigh smaller probabilities.
APPLICATIONS OF PROSPECT THEORY
Barberis (2013) paper is a review of the applications of Prospect Theory. As some argue that the
Prospect Theory only works well under a laboratory setting, the author has other ideas to share.
According to Barberis, Prospect Theory is just not well made to be directly applied. The paper is
able to trace down the various advancements that have come up in terms of Prospect
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The Prospect Park Lake
The Prospect Park lake is the only one of its kind in Brooklyn. It is man–made and roughly 60 acres
(equivalent to 45 football fields!). It is located in the southern section of the park near the Parkside
Avenue entrances and between Prospect Park West and Ocean Avenue.
An intricate system of ponds and ravines keep the lake filled with water. The park's designers,
Frederick Law Olmsted and Calvert Vaux (also designers of Manhattan's Central Park), realized that
there were several natural ponds in the higher mid section of the park.
Consequently, Olmsted and Vaux engineered a ravine that would carry water downhill from these
ponds over a series of mini waterfalls and into the lake.
The lake is about 7 feet deep and is home to 20 species of

Overview of Behavioral Economics Essay
Behavioural economics is the study of the effects that psychology has on the decision making of the
economy. This tends to be the way that people think and feel when they are spending money on a
certain good or service. The great economist Adam Smith was the first follower of this idea through
his book "The theory of moral sentiments" which dates back to 1759. However, it took over 100
years to get a more clarified meaning of how big of a role the psychology of a buyer plays in
economics. In behavioural economics there are seven basic principles which all contribute to the
decision making process. Behavioural economics can explain how people will react to different
situations such as times when there are no economic problems and times when ... Show more
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In other words most people would prefer to pay more and buy a more expensive product thinking
that by paying more it is also superior to the other products of the same category that are cheaper.
However, although the phrase "you get what you pay for" might have some validity in it that is not
always the case, due to the fact that sometimes the products that might be cheaper are just as good as
the competitor brand which has a higher price. In this instant it would be logical to buy the cheaper
product however most human beings would opt for the expensive product, assuming that it is of
better quality than the cheaper product. On the other hand, Dan Ariely rebuffs this claim and states,
"We choose what we like, not what's best." Sometimes humans don't make decisions based on their
preferences; instead they choose what they want and that leads to a process of rationalisation in
order to get what they really want. However, they still want to give the impression that they were
acting according to their preferences. Secondly, the framing effect states that presenting the same
option but in a different format can change people's decisions. Plous (1993) states that, "individuals
have a tendency to select inconsistent choices, depending on whether the question is framed to
concentrate on losses or gains." A good example of when framing is apparent is when stores
advertise sale on their products. For example two stores both sell the same product which is priced
at £50

The Contributions Of The Endowment Effect Essay
The endowment effect has been a heavily studied subject since the 1980's when it was first
described by Richard Thaler. This effect describes the phenomena where the buying and selling
prices of an object have major differences. The sellers tend to overvalue their object, requesting
higher prices than a buyer would be willing to pay. The buyers, on the other hand, demonstrate a
much lower maximum price. This discrepancy between buying and selling prices, dependent upon
the perspective of the person, is called the endowment effect. This effect has been connected to
many different cognitive mechanisms, but up until this point has not been studied from the
perspective of cognitive aging. The research in this paper will attempt to describe the endowment
effect, relevant research, potential cognitive mechanisms, and hypotheses relevant to age.
Theoretical Framework A major theory linked to the endowment effect is Tversky and Kahneman's
(1979) prospect theory. This theory provided new insight into the decision–making process, and
went further than previous theory, the utility theory, to explain how decisions are made. Tversky and
Kahneman describe prospect theory as a decision between gains and losses, or prospect and gambles
as it is referred to in their 1979 paper. With every choice we make there are probabilities of losing
and probabilities of gaining. In terms of gaining, prospect theory states that people are risk averse.
This means that when there are certain options of

The End of Behavioral Finance
CFA Institute The End of Behavioral Finance Author(s): Richard H. Thaler Source: Financial
Analysts Journal, Vol. 55, No. 6, Behavioral Finance (Nov. – Dec., 1999), pp. 12–17 Published by:
CFA Institute Stable URL: http://www.jstor.org/stable/4480205 Accessed: 17/04/2009 10:10 Your
use of the JSTOR archive indicates your acceptance of JSTOR 's Terms and Conditions of Use,
available at http://www.jstor.org/page/info/about/policies/terms.jsp. JSTOR 's Terms and Conditions
of Use provides, in part, that unless you have obtained prior permission, you may not download an
entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR
archive only for your personal, non–commercial use. Please contact the ... Show more content on
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The argumentthat asset prices are set by rational investors is part of the grand oral traditionin
economics and is often attributedto Milton Friedman, one of the greatesteconomists of the century
and one of the greatestdebatersof all time. But the argument has two fundamental problems. First,
even if asset priceswere set only by rationalinvestors in the aggregate, knowing what individual
investors are doing might still be of interest. Second, although the argumentis intuitively appealing
and reassuring, its adherents have rarely spelled it out carefully. Suppose a markethas two kinds of
investors: rational investors (rationals), who behave like agents in economics textbooks,and quasi–
rational investors (quasi 's),people who are trying as hard as they can to make good
investmentdecisions but make predictablemistakes. Suppose also that two assets in this market,X
and Y, areobjectivelyworth the same amount but cannotbe transformedfrom one into the other.
Finally,assume that the quasi 's thinkX is worth more thanY, an opinion thatcould change (quasi
'soften changetheirminds) while the rationalsknow that X and Y are worth the same. What
conditions are necessary to assure that the prices of X and Y will be the same, as they would be in a
world with only

Psychological Theories Of Behavioral Finance
Behavioural Finance
Introduction
Behavioural finance is a relatively new area of evolving research in finance. Behavioural finance
seek to combine behavioural and cognitive psychological theory with conventional economics and
finance to get a better understanding for why individual investors make irrational financial
decisions.
According to Sewell (2007), "Behavioural finance is the study of the influence of psychology on the
behaviour of financial practitioners and the subsequent effect on markets." The science focuses on
the effects of individual investors making decisions based on "hunches or emotions."
Ritter (2003, p.429), describes behavioural finance is based on psychology which suggests that
human decision processes are subject to several cognitive illusions. These illusions are divided into
two groups as illusions caused by heuristic decision process and illusions rooted from the adoption
of mental frames grouped in the prospect theory (Waweru et al., 2008, p.27)
People may make predictable, non–optimal choices when faced with difficult and uncertain
decisions because of heuristic simplification. Behavioral biases, abstractly, are defined in the same
way as systematic errors are, in judgment (Chen et al, 2007).
Behavioral finance theories, which are based on the psychology, attempt to understand how the
psychological variables (heuristics, prospect, and herding) and perceived risk behaviour (Risk
Perception, Risk attitude and Risk Propensity) influence individual

Prospect Creek Investigation
Senior Geography Project
Year 11 Geography
To investigate the various impacts of Water pollution on Prospect Creek in particularly if
recreational activities affect the creek and how rubbish is managed.
Feres Raad Acknowledgments
Fairfield Council
Table of contents
Introduction...................................................................................1
Aims, Objectives & Hypotheses.........................................................2
Background Information....................................................................3
Methods.......................................................................................4
Results.........................................................................................5
Conclusion/Discussion of References..................................................6
Evaluation.....................................................................................7 Introduction
Domestic pollution is produced by humans when toxic chemicals/waste or objects are thrown down
the drain or flushed down ... Show more content on Helpwriting.net ...
Another key problem was going over the 2000 word limit. I reached the word limit in the conclusion
making me have to cut things out of the conclusion, introduction and background information.
The other problems i faced were:
People telling me they're not interested and just walking off
Calling the council numerous times to get the answers needed
As there is negative there are many positive things I have learnt while i was creating my SGP. They
include:

Learning how to construct a well written report
Greater self confidence in asking random people questions on the street this resulted in me gaining
better communication skills
I have learnt many new ways of gaining data and how to use many chemicals and metres to
determine the results. This assignment has also gave me a look at how the council manages its time
to make the creek cleaner.
If I was to do this again many things will be different. They include:
Starting it earlier than on the holidays
Try to get a more variety of

The Treatment Prospects For Schizophrenia
The Treatment Prospects for Schizophrenia
Cecilia Pivarunas
Northern Virginia Community College
Abstract
Schizophrenia is a mental disorder that can present in many different ways. Most often, symptoms
display in a negative or positive manner. While medications are on the market to mitigate symptoms,
the optimal treatment method couples both pharmaceutical and psychiatric rehabilitation. The
Patient Outcomes Research Team, commonly called PORT, has issued treatment recommendations
for Schizophrenia. The first publication, issued in 1998, has offered compiled research in the realm
of Schizophrenia. The following paper will discuss the treatment options for Schizophrenia to reflect
the 2003 guidelines of the PORT publication.
Keywords: Schizophrenia, Updated treatment, Recommendations
The Treatment Prospects for Schizophrenia
In the DSM–5, Schizophrenia is termed as having both positive and negative symptoms. Positive
symptoms include delusions, hallucinations, or disorganized speech (American Psychiatric
Association, 2013). Negative symptoms, on the other hand, are anhedonia and depression.
Anhedonia is the inability to gain pleasure from seemingly pleasurable experiences. The threshold
for DSM–5 indicates that a person must show two or more symptoms to be considered
Schizophrenic. The patient must display symptoms for a minimum of six months. A publication by
Stephen Erhart, Stephen Marder and William Carpenter discusses the treatment of Schizophrenia
(Erhart et al.,

Individual Risks Perception : Risk Perception
2. Literature Review
2.1. Individual risk perception
Risk perception is the person's subjective uncertainty about what she could lose or gain from a
transaction (Cox & Rich, 1964). In a similar vein, Ricciardi (2008) defines perceived risk as "[...]
the subjective decision making process that individuals employ concerning the assessment of risk
and the degree of uncertainty". Risk perception is related to the amount, possibility, and exposure to
loss (MacCrimmon & Wehrung, 1988), to confidence in individually assessed probabilistic
estimates about the degree of situational uncertainty (Sitkin & Weingart, 1995), and to lack of
information (Weber, 2004). "The practice of perception is a technique by which people categorize
and understand their sensory intuitions in order to provide an assessment of their surroundings with
the recognition of actions" (Ricciardi, 2008).
According to Ricciardi (2008), the most relevant cognitive and emotional factors that influence
individual risk perception, and in turn judgment and decision making process, are: heuristic,
overconfidence, the concepts of loss aversion and framing – which are the tenets of prospect theory
– anchoring, familiarity bias, perceived control, expert knowledge, affect feelings and worry.
In the following sections () I review two different descriptive models of decision making under risk:
Expected Utility Theory and Prospect Theory. In section (), I compare them and select the one that
suits individual risk

The Crisis And The Prospects For Ifis
Korea's "IMF" Crisis and the Prospects for IFIs
In 1997, the Thai baht came under speculative attack from international investors and the Thai
government was eventually unable to support its currency peg. Due to the interconnected nature of
the global economy, contagion occurred and the problems affecting Thailand spread to countries
such as Malaysia, Indonesia, the Philippines, and South Korea. This event came to be known as the
Asian Financial Crisis in the West. However, in South Korea it is known as "the IMF," as misguided
policies of the International Monetary Fund (IMF) led to a deep and more painful recession,
inequality and an gutted the nation's middle–class. Below is an overview of the IMF's "rescue" of
Korea in 1997/1998, a description of my opinion on the situation, and my opinion of the fairness
and effectiveness of international financial institutions (IFIs) in general.
The IMF offered assistance to South Korea in December of 1997, but misguided conditions attached
to the loans hurt the country. The IMF intended help avoid mass defaults on dollar denominated
loans, and fight inflation that was severely affecting the economy of Korea (and other countries).
Importantly, the crisis hit Korea after what was one of the most spectacular rises in wealth ever
witnessed in history. In the three decades prior to the crisis, Korea came to be known as an "Asian
Tiger" economy due to its fast and strong rise. In fact, the Korean economy was relatively healthy at
the

Future Prospects For The Future
What are the future prospects for work in Canada?
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Course
Affiliated institution
Tutor
Date
Introduction
There are various things which are likely to work in the future Canada. One of the key issues which
will be discussed in this paper about the future of work in Canada include globalization. Several
models will be discussed in this paper about the sustainability of work in the face of the increasing
pressures within the limits of work and also the available resources which are ready to be exploited.
In this paper, a discussion about the determinants of future work, fairness and justice in the Canada,
the dominance of the capitalistic principles, new economic models emergence, and the technological
evolution are some of the factors which will be discussed in this paper in relation to the future
prospects of Canadian work. In addition to all those factors influencing the future of Canadian work,
other areas which will be discussed in this paper include the impact of the unions on work and the
workers, the inequality in work places, insecurity at work, the health impacts of work and its
environment and also the organization of work in Canada.
The overall Canadian industry and work operate in the context of free trade and also globalization.
The increase in integration and economic interdependence has no effect on many economies,
including the Canadian economy. The integration has instead strengthened the nation which makes it
to stand out. Opening up new

Decision Making And The Prospect Theory
Introduction
Decision making is the act of choosing the best solution to a problem depending on its value and the
preferences of the decision maker. In the first part of this essay, we will explore the Expected Utility
theory and the Prospect Theory, which are normative and descriptive approaches to making
decisions with inherent risks. The first part of the essay argues that Expected Utility Theory is a less
viable hypothesis to decision making and is fundamentally flawed compared to the Prospect Theory
in description and function. Prospect theory is a better model for decision making because firstly,
decisions are not often made objectively and can be affected by decision weights. Secondly,
individuals are not risk averse as suggested by the utility theory, but are instead loss averse. Lastly,
individuals evaluate decisions not by their final resting utility, but instead they react dependently
based on their reference point. The second part of the essay will delve into the topic of heuristics
that emerge in investment decision making. The main biases that investors make include disposition
effect, anchoring and adjustments bias and overconfidence.
Part 1.
Expected utility theory states what rational decision makers should do in order to maximise their
utility. On the other hand, Prospect Theory describes how individuals make decisions when faced
with perceived risk and uncertainty. Utility can be explained by how much an individual values an
extra unit of wealth.

The Future Prospects Of Norway
In order to discuss the future prospects of Norway for the coming years, it is interesting and useful
to review the performance of the country in the past to identify possible trends.
At the end of 2013, Norway was calculated as having the second highest GDP in the world (only
under Luxembourg), as it was 65,515 US dollars per capita. The following graph (Chart 1 – see
appendix) shows the growth in Norway's GDP from 1970. Here, we can see the effect of the
recession in 2008, and how it reflected on the downfall of the GDP's value. Only until 2010 is where
we see the value become even with the pre–crisis number. Yet, according to Figure 1 (below), the
index shows that it has not yet reached the value that it would have, following the trend prior to
2008.
Figure 1. Norway's Gross Domestic Product. The graphic shows the growth of GDP for Norway in
red, Luxemburg in black and the rest of the OECD countries in grey.
Source: OECD, 2014
Apart from GDP, there are also other indicators that can give us an impression of the economic
performance of Norway in the past years. For instance, in 2013 the long–term unemployment rate
was 9.3% and the overall trend suggests it may continue to go down (Appendix 1, Chart 1). This
refers to those in unemployment that are aged 15 and over, were without work during the reference
week, yet were available for and actively seeking for work during the previous four weeks.
Moreover, the inflation and long–term interest rates

Evaluating The Options On A Scale Of Utility
Introduction Myriad decisions affront us every day. Each decision is decomposable into sub–
decisions. For instance, consider the mental turmoil (or apathy) required to determine whether you
shall go grocery shopping. First, you determine an initial need for grocery shopping (i.e., you are out
of milk, eggs, etc.). Next, you consider what you would rather do––an evaluation of utility. This
cost–benefit analysis continues until shopping or staying is perceived with marginally greater utility.
Though these calculations require a second or so in your mind, in decomposing this choice, one
finds a series of individual decisions contributing to the final. These sub–decisions may "How much
is milk worth my going to the store?" or "How much does this television show dissuade me from
going to the store?" However, one can go deeper still. In answering each of the above sub–questions,
you subconsciously evaluate the options on a scale of utility. Consider this concept though: for any
arbitrarily selected value on that scale, you must subconsciously "decide" if the value is
satisfactory–a boolean decision (see Fig. 1). Additionally, all but the lowest layer of sub–decisions
are considerable as independent decisions in different contexts. Accordingly, these decisions are
likewise decomposable to final boolean decisions, assuming all high level "decisions" are
decomposable. Also note these boolean decisions are never consciously considered in first order as
that requires additional levels

Example Of Prospect Theory
Prospect theory is a theory of decision making under conditions of risk. The theory is best known
for its hypothesis that individuals are risk–averse with respect to gains and risk–acceptant with
respect to losses and for its emphasis on the importance of the actor's framing of decisions around a
reference point.
Prospect theory is one of a number of alternative theories of individual choice that behavioral
decision theorists have constructed in an attempt to integrate observed anomalies in expected–utility
theory into a more descriptively accurate theory of choice using an S–shaped value function. The S–
function curve of the value is derived from the experimental results and lacks a complete theoretical
explanation. But Tversky and Kahnemen ... Show more content on Helpwriting.net ...
Prospect theory is considered "substantive rationality" rather than "procedural rationality."
Substantive rationality is the optimization of a given goal under given conditions and constraints,
and is a function of goals and situational constraints but not intervening reasoning process. While
procedural rationality focuses on the decision–making process. Therefore, the prospect theory
cannot be adapted to the "cognitive–rational debate". The evaluation stage in the prospect theory is
more similar to the rational economic theory. But it is the theory editing and framing have more in
common with cognitive process theories. To conclude, the prospect theory research program is a
limitation of the theory but not a fatal flaw.
Shortcomings of Prospect Theory
a) The descriptive generalizations on which prospect theory is based emerge from static conditions
of experimental research in highly structured, non–interactive laboratory settings make it difficult to
extrapolate its findings to the complex world of international relations where the consequences of
one's actions are partially a function of the actions of another.
1) It is extremely difficult in the real world to identify whether an actor selects a particular option
because of framing, loss aversion, or any other anomalies of expected–utility

Study Stock Market Trends : Ron Insana. Investments Don 't...
How to study Stock market trends – Ron Insana Investments don't always work as planned on Wall
Street. However, financial markets send signals regarding the future of the economy. Markets can
move in advance of information available to the general public. In a broad view, markets seemingly
anticipate political events. In other times, the markets will anticipate economic events long before
the investing public understands what's emerging in the general economy. The market is also
effective at discounting a transformational event. When the market excessively anticipates all future
revenues and all the future profits that would accrue to the phenomenon, a bubble or mania
develops. The repetitive nature of the phenomenon, or investment fad, ... Show more content on
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The stock and the fundamental reality of the company can become divorced. Eventually, the stock
price will reconnect with economic reality, given the way the markets have priced future profits.
People should pay attention to the indicators that suggest the bubble trend is maturing. For example,
when the Federal Reserve is raising interest rates, investors should not be in equities. Investors need
to recognize the historical significance of a shift in the fundamental economic environment, as
bubbles will continue to occur. The question is what will be the impact on the subsequent asset class
that experiences bubble mania.
Behavioral Finance and the psychology of investing – Greg La Blanc How can a bubble ever occur?
For markets to be efficient, the only element that has to be true is that prices consistently reflect the
information available at that time. However, bubbles are now developing in faster intervals and in
different sectors of the market. Experience flattens out the makings of a bubble and experience also
benefits investors by means of avoiding repeated errors in a particular investment.
Game theory applies to industrial organizations, labor markets and pricing. Game theory rarely
applies to finance. The Nash equilibrium is a term used in game theory to describe equilibrium
where each player 's strategy is optimal given the strategies of all other players. A Nash Equilibrium
exists when

Consumer Behavior Is Important For Business Firm Development
Consumer behaviour is always a crucial part for business firm development. International firms
invest myriad of money to understand their customers, in order to satisfy the need and wants of
customers. For example, IKEA, the world's leading home furnishing company, spent a total of £30
million in 2012. It aims to improve the shopping experience for customers, including the bedroom
showroom redesign. It is crystal clear that consumer behaviour plays a vital part in the success or
failure of a product. Meanwhile, consumer behaviour is a process which consumers go through
when they make purchases and it involves numerous factors that influence their decisions. As a
consumer, we make decisions every day. Some are far–reaching while others may be trivial and
inconsequential. However, we all know that human beings are irrational, our preferences often
deviate from rationality in the standard economics. We often make the wrong decision and it may
bring unfavourable consequences along with negative side effects. There are countless reasons for
making irrational decisions. One of the most astonishing arguments I recently discovered is that
people feel the pain of loss more acutely than they feel the pleasure of gain. Why this happened ?
For instance, when we buy a sofa from IKEA, they often provide a 30 days money–back guarantee.
However, even if we noticed that the sofa has imperfections, we seldom go back and return. Why ?
It is because we consider returning the sofa as a loss. A

In the modern finance theory , behavioral finance is a new...
In the modern finance theory , behavioral finance is a new paradigm , which seeks to appreciate and
expect systematic financial market influence of psychological decision making ( Olsen R A, 1998).
In the recent studies irrationality in the decision making was revealed , based on certain cognitive
limitations. The present chapter is divided into two aspects
According to traditional models in finance and economics, human beings are rational while taking
their decision. However the recent studies explain that decision making is based on certain cognitive
limitations. As the information's are overloaded, we will be applying certain short cuts or heuristics
in order to take a decision. The most important heuristics in the representativeness ... Show more
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Essentially, behavioral finance attempts to explain the what, why, and how of finance and
investment, from a human perspective" (See figure 2). (Shefrin, 2000) however, mentioned the
difference between cognitive and affective (emotional) factors: "cognitive aspects concern the way
people organize their information, while the emotional aspects deal with the way people feel as they
register information" . Figure 2 The Underpinning of Behavioral Finance
Source: (Victor Riccardi & Helen K Simon, 2000)
PSYCHOGRAPHIC MODELS
Models are designed to classify people according to certain characteristics, tendencies or behavior..
Psychographic classifications are particularly relevant with regards to individual strategy and risk
tolerance. The useful models of investors psychographic were Barnewall (1987) and Bailard, Biehl
and Kaiser (1986).
Barnewall Two way model (Barnewall, 1987)
This is one of the most previous and most prevalent investor model based on the work of Marilyn
MacGruder. Barnewall distinguished the investors into two types : passive investors and active
investors.
Passive investors are those investors those who have become wealthy passively –by inheritance or
by risking the capital of others rather than their own capital. They have a greater need for security
than they have tolerance for risk. Occupational groups such as corporate executives, lawyers,
Chartered Accountants,

Theory Of Games And Economic Behaviour
Although rationality provides the foundation for behavioural decision theory, current findings
suggest that heuristics and biases have a significant impact on individual decision making.
Rationality can only go so far in explaining individual decision making.
A large part of early research into decision theory was based on the economic or normative
approach, which tries to predict the actions of a so called 'rational decision maker'. Although
Bernoulli (1738) was the first to introduce the concept of utility into decision making, it was Von
Neumann and Morgenstern's book, 'Theory of Games and Economic Behaviour' which
revolutionised the idea of a rational decision process. Von Neumann and Morgenstern (1947)
explicitly outlined the ... Show more content on Helpwriting.net ...
In contrast, EU theory suggests people have different attitudes toward risk – some would be risk
averse and prefer the guaranteed payment, even though the expected value is lower, while others
would choose the riskier bet. However, EU Theory and the normative approach to decision making
are not without criticisms. As with every mathematical model, EU theory is a simplified
representation of reality and does not guarantee reliable predictions of human behaviour. Indeed,
empirical evidence suggests the existence of systematic deviations from rationality. As Dawes
(1988) wrote, "People, groups, organizations, and governments make choices. Sometimes the
consequences of their decisions are desirable, sometimes not" (p. 2). Hence it can be argued that
decision making is not purely rational (where rationality is defined as the decision predicted by EU
Theory).
In in attempt to create a more psychologically accurate description of decision making, Kahneman
and Tversky (1979) developed Prospect Theory, which theorized that individuals have different
perceptions when considering losses versus gains. In contrast to EU Theory, which suggests we
make decisions that maximise our utility, research by Kahneman and Tversky (1979) found that
information is not processed in such a rational way. For example, according to EU Theory, the
amount of utility gained by receiving $200 should be equal to receiving $300 and losing $100 as in
both situations

The Prospect Of Human Cloning
The prospect of human cloning was introduced in February 1997 when an embryologist was able to
produce a lamb through the process of cloning. Once the lamb was cloned, the question of whether
research for human cloning came into being. Society and researchers have feuded over whether
human cloning should be banned or allowed for research and reproduction purposes. Each side has
reasonable ideologies to continue their stance towards the opposing argument. Pro– cloners believe
that the research developed from human cloning will benefit society, while those who oppose it
believe there are numerous risks in allowing the research. A decision will be reached when both
sides compromise and reach an agreement. In the novel Scientific and Medical Aspects of Human
Reproductive Cloning, written by a committee of scientist and engineers, state that society will be
the overall decision maker for human cloning (2003, p. xi). Many individuals in society currently do
not approve of the human cloning research process. Some are concerned that the cloned child would
have issues with its self identity. and some believe that cloning a human is overall morally wrong.
The prospect of social identity problems arises from what Nestor Morales, a Professor of
Psychology at New York, cites that cloned children, "knowing that they have been a planned to be a
copy from another problem, ... , may diminish their sense on uniqueness" (Morales, 2009, p. 44).
Objectors state there can be a potential problem

Maps Of Bounded Rationality : Psychology For Behavioural...
Maps of bounded rationality: Psychology for behavioural economics – Daniel Kahneman 2003
Introduction
Kahneman's article is an analysis of intuitive thinking and how it guides our decision–making.
Although primarily aimed at the field of psychology, it is an interdisciplinary article with
applications in economic theorising. Kahneman attempts to differentiate between two systems of
thought, one of intuition (system 1) and one of reasoning (system 2), and argues that many
judgements and choices are made intuitively, rather than with reason (a slower and more deliberate
process). Intuitive decision making, which encompasses heuristics, although generally more
efficient and rapid, makes the agent potentially subject to errors due to framing effects or violations
of dominance. The analysis of the studies and theoretical situations also provides criticism of the
commonly held model of the rational agent within economics. The article also further conceptualises
Kahneman's theory, the Prospect Theory (Kahneman & Tversky, 1979), which has descriptive
applications of people's choice in decision–making situations involving risk and known probability
of outcomes. These situations are typically unexplained by the more normative rational agent model.
Summary
Kahneman's systems of thought is largely built on the framework of Stanovich and West (2000; as
cited in Kahneman, 2003). It describes two types of thought processes: system 1 (perception and
intuition) and system 2 (reasoning).

Prospect Theory
Summary of the learning points (ranked by importance to you) Today's class discussed the mental
accounting for money management. 1. Prospect theory. The theory can be represented by a value
function, as shown below. The value function starts from a reference point, and is normally concave
for gains, and convex for losses. It is also steeper for losses than for gains. The theory intends to
explain why people behave irrationally when making choices. 2. Framing effect. It refers to the
difference in response to the same question represented in different ways. This technique is
frequently used in marketing ads campaign, such as PAD. 3. Sunk–Cost effect. When people have
put effort into something, they are often ... Show more content on Helpwriting.net ...
Secondly, according to mental accounting, we assign value and goal for money in each account. We
also set aside some expected gain before we make any investment. As long as we meet our target,
then we can relocate the money for some other accounts. By investing money long term, we forgo
the opportunity to enjoy the gain in short term. (2) Gift card I just realized the gift card is another
combination of framing and sunk–cost effect. Even though I received the gift card, I didn't pay for it,
whoever gave I to me did spend money in that store. There are two scenarios on how to spend the
gift card money. On one hand, I view it as free money and spend it on luxury items, which I would
not normally buy; usually I pay for the excess amount out of my own pocket. So I spend more than I
should. Or on the other hand, I forgot about the card. Most of the gift card has fine print which states
the expiration date. Lots of people do not notice this, and forgo the opportunity to claim the amount.
Money does not expire; gift card does. Framing enables the company to put a time limit on the

Daniel Kahneman
In 2002, psychologist Daniel Kahneman won the Nobel Prize in economics. In the early 1970s,
Kahneman and Amos Tversky set out to disassemble an entity of economic theorists, Homo
economicus. Kahneman's main focus was human irrationality. In his career there were three
important phases. At first he and Tversky did a series of experiments in which revealed twenty or
more cognitive biases. They defined these as unconscious errors of reasoning that distort judgment.
Characteristically paired with cognitive biases were anchoring effects which are the tendencies to be
influenced by irrelevant numbers we are exposed to. In the second phase of his career, he and
Tversky showed that when making decisions under uncertain conditions people do not behave ...
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He theorized experienced well–being compared to remembered well–being which is the way that
most researchers relied on to explain happiness. From this he discovered that experienced happiness
was caused by different things that caused remembered happiness. The main component in
remembered happiness dealt with the duration. Commonly in memory a person can remember a
situation in which they were supposedly happy in that moment when it turns out when they
remember it they were not. For example a surprise guest shows up to a person's house that day. In
the moment they are delighted to see that person. But later on when reflecting on that day the person
may realize that the surprise visitor actually messed up their plans for the day which makes them
upset. Though much more research is needed in hedonic psychology, Kahneman's concepts have
laid the foundation for the findings he reports in his

Prospect Impressions: Prospect Analysis
Prospect Impressions: Title In this weeks Prospect Impressions, "Boo" Nieves goes coast–to–coast
and scores a pretty one for the Michigan Wolverines. In the OHL, a pair of 16–year–olds shine,
while Saint John forward Adam Marsh goes between–the–legs in QMJHL action. Leon Draisaitl
continues on his torrid scoring pace, re–energizing the Edmonton Oilers lineup on a daily basis.
Lastly, a pair of goaltenders from Switzerland make it into this week's highlights, one of them for a
completely unorthodox reason. Over the course of his first three years in college hockey, University
of Michigan forward Cristoval "Boo" Nieves developed a reputation as a quality playmaker. Often
preferring to defer to a teammate, Nieves surprised the ... Show more content on Helpwriting.net ...
Nathan Noel & Adam Marsh with #SeaDogs goals. Shots 10–8 Dogs.— Moncton
Wildcats (@monctonwildcats) December 5, 2015 The success Leon Draisaitl is having in the NHL
might be surprising to some, but for those that saw what he did in the WHL playoffs last year, it's
simply business as usual. With 10 goals and 18 assists in 19 playoff games, Draisaitl was named as
the WHL's Playoff MVP as his Kelowna Rockets won the championship. Now in Edmonton,
Draisaitl has found chemistry with Taylor Hall and Teddy Purcell, creating one of the most exciting
lines in the league. His speed, strength, and vision have been mesmerizing, and as an example, take
a look at this move and pass Draisaitl recently pulled off. Can we just talk about this @Drat_29
move & pass?! pic.twitter.com/9y0FnXTk6V— Edmonton Oilers (@EdmontonOilers)
December 12, 2015 "This is probably the best I've felt, most positive I've felt in
my six years." @hallsy04 on chemistry with @Drat_29 and @teddypurcell16—
Edmonton

Fast And Slow By Daniel Kahneman
In selected chapters of Thinking, Fast and Slow, Daniel Kahneman challenges the traditional
economic utility model by presenting the prospect theory, where pecuniary variables are no longer
the only determinants. George A. Akerlof and Richel E. Kranton support this challenge by providing
two economic analysis models that include identity as an important variable. While Kahneman
focuses primarily on individuals' inability to make decisions based on profit–determined utility
values, Akerlof and Kranton emphasize that motivation associated with identity is the missing
component of the traditional utility model.
In order to demonstrate flaws of the traditional view, Kahneman supports three principles of
prospect theory with various examples. First, by pointing out errors in Bernoulli's model and the
indifferent model, Kahneman emphasizes the broad range of the reference point, that it is not only
the change of wealth, but also the context and the mindset. Second, Kahneman analyzes loss
aversion, one of the dominant mindsets. Third, Kahneman argue that sensitivity has great impact on
decision making by providing gambling cases of rare and risky events. With the knowledge of these
three principles, Kahneman further implies that people can be trained to against these intuitive
system one thinking patterns.
While acknowledging the limitation of the prospect theory, that it fails to deal with disappointment
and regret, Kahneman neglects the effect of emotions that human

Complications Of The Modigliani's Life-Cycle Theory
The General Theory was formally introduced in the 1936 by Keynes and This theory Introduce the
relationship between consumption and income, it was the first discussed about saving motives
(Fisher et al. 2010). The Modigliani's Life–Cycle Theory was formally introduced by Modigliani e
Brumberg (1954) (Browning & Lusardi, 1996). The life–cycle theory incorporate socioeconomic
variables an uncertain future and relationship between saving and the age–structure of the
population. According to this perspective a young individual has less wealthy and top wealthy is
reached just before individual retire. According to this perspective people are distributed by the
population pyramid, which over time the population growth and there are more number of ... Show
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(Browning & Lusardi, 1996). The relationship between saving and the age–structure of the
population is still currently considered as a good indicator for analyst behavior (Deaton, 2005). The
Permanent Income Hypothesis was formally introduced by Friedman (1957) and investigated high
income might save more and the individual consumer's at a level consistent with their estimated
long term average income (Shefrin & Thaler, 1988). This theory is similar to theory Life–Cycle.
(Browning & Lusardi, 1996). In the 1960s Theodore Schultz and Gary Becker emerged Human
Capital Theory (HCT) that defend investments in knowledge because the key to the economic
growth is where people interact with knowledge whatever increases the productivity and earnings.
First publication of the book Human Capital by Gary Becker in 1964 and has impact in economics,
education and sociology literature (Tan, 2014). Education is formalized at primary, secondary, and
higher levels by Cohn & Geske (1990), informal education at home and at work by Schultz (1981),
training and education by Mincer (1974) (Sweetland,

Prospects For The Us Economy
Prospects for the US economy in 2016 November 6, 2015 The US economy is likely to grow by
2.7% in 2016, but developments abroad pose risks Despite the recent softness in high–frequency
data, the economy is close to full employment and growth is likely to average 2.4% in 2015. It
should accelerate slightly in 2016, as the buoyant labour market will boost private consumption,
offsetting some of the weakness in the industrial and trade sectors. Federal Reserve (Fed) officials
have highlighted the external headwinds posed to the US economy by slowing growth in emerging
countries and a continued debt overhang from the financial crisis. What next Real GDP is likely to
grow by 2.7% in 2016. It might slow towards year–end, winding down ... Show more content on
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Car sales got a large boost, up to an annualised rate of 18.1 million units in September.
[***GDP_chart***] The housing sector is recovering and residential investment will continue
contribute positively to GDP growth. Housing starts have topped an annualised rate of 1 million for
the past five months. Existing home sales have declined recently, but they have been above
expectations for most 2015. The recent acceleration might not be supported in the medium term
because of limited supply and affordability constraints. Lower oil and gas prices are not as
stimulative for the US economy today as they once were due to the negative impact on the oil and
gas industry that has grown rapidly in recent years. The oil and gas rotary rig count is at a post–
recession low of 795, less than 50% than the peak of active rigs a year ago (see today 's
PROSPECTS 2016: Global oil market). Low oil prices are weighing on investment and employment
plans of corporates in the energy sector; they will remain a restrain in 2016. Equipment investment
should stay upbeat, as testified by strong shipments. Some risks are posed by the foreign growth
outlook and tightening financial conditions, which could restrain investment growth in the second
half of next year. The main drag to third–quarter growth came from contracting inventories, whose
quarterly change fell to 56.8 from 113.5 billion dollars, the largest swing in four years. The
inventory

Disposition Effect Essay
Abstract
Many stock market anomalies could not be explained by Efficient Market Hypothersis (EMH). The
psychological biases, such as disposition effect, might help in explaining some of the behavioural
anomalies. Many researchers found that the presence of abundance of disposition–prone investors
could affect the market prices. However the underlying causes of disposition effect is still unclear.
Introduction Disposition effect is an anomaly that relates to the investors's propensity for selling
shares that have increased in value and holding shares that have decreased in value (Financial Times
Lexicon, 2016). The S–shaped prospect theory value function is expressed in terms of gains or
losses where the risk aversion in the domain of ... Show more content on Helpwriting.net ...
The investors might have different trading strategies for small stocks and large stocks. The investor
psychology have led to heterogeneity in investors' beliefs might exhibit behavioral biases, which
could result in irrational trading decision–making.
The Underlying Causes of the Disposition Effect and the Implications of Disposition Effect in
Financial Decision Making Most of the past research has linked the disposition effect to prospect
theory. Barberis and Xiong (2009) mentioned that prospect theory is a potential ingredient in
providing a pure preference–based explanation for this effect. Under prospect theory, people are
strongly avoiding losses in order to obtain gains due to loss aversion. Investors are reluctant to
realise losses because they seem to feel the pain of loss more strongly than gains (Kahneman &
Tversky, 1979). Therefore, people hold the losers because it is believed that they are more
comfortable with 'paper loss' rather than 'realised loss' (Barberis & Xiong, 2009). However, Kaustia
(2010) argued prospect theory value function is unrealistic to explain disposition effect as people do
not sell the stock following small gains in reality. He found that the people are more likely to hold
the stock when the gains are 70% or more, and the propensity to sell soared when the capital gain is
zero. Despite of that, prospect theory would be a potential explanation for the disposition effect (Li
& Yang, 2013). Some researchers have

The Prospect Theory Paper
If you were given the opportunity to make the decision of receiving $5000 with 100% certainty or
the option with a 50% chanced of receiving $7000, what would you do? According to the Prospect
Theory, people generally select the option of winning the $5000 where there is absolute certainty of
a gain, over the option that is only half as certain. The Prospect Theory was first introduced by
psychologists Daniel Kahneman and Amos Tversky in the late 1970's and was further developed
into the early 1990's after years of research. Essentially, this is an expressive–theoretical model that
is to be applied to humans, that describes our behaviors and abilities to make decisions under certain
circumstances. And, is comprised of the uncertainty or certainty ... Show more content on
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We tend to ignore the final outcome of a decision and focus on the certainty or uncertainty of it. The
value we place on winning and losing vary, which is what the Prospect Theory suggests. The
Prospect Theory is a model that psychologists created to explain our behavior when it comes to
decision making and how we make decisions. Typically, if a decision has to do with a gain, people
will lean towards the most certain option because they may fear that if they selected the other option
that would be disappointed. On the other hand, decisions that have to do with loses are seen as the
opposite by the majority of people. This is because we feel more risky when selecting the uncertain
option over the certain option because we are trying to avoid a significant loss. The Prospect Theory
provides an explanation on how people make choices under strained conditions of gains and losses
in their applications of the real

Difference Between Prospect Theory And Prospect Theory
INTRODUCTION
Generally, it is believed the net effect of the gains and losses involved with each choice are
combined to present an overall evaluation of whether a choice is desirable. Scholars tend to use
"utility" to state enjoyment and contend that we prefer instances that maximize our utility.
However, studies have found that we don't actually process information in such a rational way.
Kahneman and Tversky presented an idea called prospect theory in 1979, which contends that
people value gains and losses differently, and, as such, will base decisions on perceived profits
rather than perceived losses. Thus, if a person were given two equal choices, one expressed in terms
of possible gains and the other in possible losses, people would choose ... Show more content on
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First, in prospect theory, people derive utility from gains and losses, measured relative to some
reference point, rather than from absolute levels of wealth: the argument of Kahneman and Tversky
motivate this assumption, known as "reference dependence," with explicit experimental evidence
(see, for example, Problems 11 and 12 in their 1979 paper), but also by noting that our perceptual
system works in a similar way: we are more attuned to changes in attributes such as brightness,
loudness, and temperature than we are to their absolute

Port Prospect
The city of Port Prospect, which has around 50,000 inhabitants decided to follow the privatization
path by contracting out the majority of its services. The city Of Port Prospect now is ready to
analyze two different possibilities to privatize itself. Denhardt & Denhardt (2015) the public
administrator accepts internal benchmarks as the reflections of its own decisions. Public serves also
is sensitive and reactive about he influence that he has on his job as well as the impact within the
community (pg.7). On this particular case the City of Port Prospect's major should comply with the
premise that Denhardt refers to in order to fulfill its main duties as well as comply with the
community's needs. According Denhardt (2015) public servers should be held accountable to
institution's standards, public interest, and constitutional law (pg. 123) The first option to have
services provided to The City of Port Prospect would manage at least 100 ... Show more content on
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This specific measure could provide efficient services to the city like in the case of Sandy Springs.
The city of Sandy Springs has successfully incorporated in 2005 to a company named CH2 HILL
.As a result the city of Sandy Springs does not have current liabilities and its services have met
standards of efficiency. Based on that premise the contractor has overseen the process and that the
bids with subcontractors were essentially offering prime services. Furthermore, CH2 Hill has also
implemented a system where customer service hot lines is offered 24/7 and complaints were
resolved and address accordingly without any red tape (ReasonTV,2011). Having the example of
Sandy Spring it is evident that the premise of contracting a company to take over the subcontractors'
hiring as well as all services provided should be the best– case scenario to take advantage of the
privatization model

Framing Effects the Sales Promotion by Referring to the...
The concept of framing which is a part of prospect theory (Kahneman and Tversky 1979) is closely
related to the formation of reference price in the consumer's mind. Outcomes above the consumer's
reference point are presented as gains and it affects choice, judgment, and risk–taking differently
than the same alternatives which are below the reference point and are coded as losses by the
consumer. In extant literature, there have been efforts to explain the framing effects of sales
promotion by referring to mental accounting theory. Thaler and Johnson (1986) have proposed that
consumers use hedonic rules to edit their mental accounts, therefore when they see a small gain
(e.g., price discount) relative to a big loss (e.g., purchasing cost), they prefer to separate them
psychologically into two different accounts rather than integrate them. This is the silver lining
principle (based on prospect theory) and it also says that utility functions are concave for gains and
convex for losses, and the curve for losses is steeper than that for gains. Because the size of a
promotion is usually small relative to the purchasing cost, consumers should create a new account
for the promotion rather than integrate it into the purchasing cost, regardless of the promotional
types.
This proposed study aims to use mental accounting theory and sales framing concepts to upgrading
promotions and compare the attractiveness of non–monetary promotions versus price discount
promotions in a

The And Prospects For European Migration
BREXIT AND THE PROSPECTS FOR EUROPEAN MIGRATION I. Introduction Behind the
populist veneer of Brexit, the vote to dismantle political and financial relations with the EU was, in
reality, an opposition to the free movement of economic migrants within the United Kingdom.
Despite the strong assertions of the Leave campaign, there is still much ambiguity concerning the
future economic consequences of the exit, particularly regarding domestic migration policy. Though
a stricter EU migration policy will undoubtedly develop in the wake of Brexit (as this was the
crucial ideological reason for the exit), the UK's potential corollary integration into the European
Economic Area could render antecedent EU policy mostly unchanged. However, despite this
reassurance, a number of immigration law academics and interlocutors have expressed concern
regarding citizenship rights for UK nationals in extralocal EU residence. Though their prospects
have been speculated, the determination of their resultant citizenship status will be contingent on the
ongoing international negotiations. This correspondingly relates to resident EU nationals in the UK.
Nonetheless, it is clear that Brexit, has 'fundamentally changed [...] the basis on which EU citizens
may enter and reside in the UK', and is rife with economic '[...] complexities, opacities, and
uncertainties...' This uncertainty further relates to the prospect of additional exit campaigns
developing throughout Europe. A short–term "chain–reaction"

Potential Explanations Paper
Potential Explanations
US – Israeli relations often appear to focus on America's ability to enforce its sphere of influence in
Israel by its diplomatic and monetary utility. Since 1976, Israel has been the most exponential
annual recipient of US aid and the largest recipient of cumulative US assistance since World War II.
The US had provided over 95% of economic development assistance and food aid to Israel, totaling
to roughly $68 million per year between the years of 1949 and 1965. From 1966 through 1970 aid
increased to about $102 million to include an estimated military loan increase of 47%. From 1971 to
the present, US aid to Israel has averaged over $2 billion per year; two– thirds of which has been
military assistance (Sharp,2015). The ... Show more content on Helpwriting.net ...
The Prospect theory may help explain these anomalies. This theory provides a framework for the
evaluation of alternative choices made by individuals, firms and organizations. The first case to be
examined is the Israeli invasion of Lebanon in 1982 which is exemplary of Israel's occasional
nonconformity to US requests. In summary, Israeli Defense Forces (IDF) invaded Lebanon despite
President Reagan's execution of a cease fire. This act of non–compliance beckons the question, why
did Israel accept the risk of having sanctions imposed on them by their primary financier? Or why
didn't the US influence over Israel manifest favorable actions for the US? There is potential for an
explanation by applying the Prospect theory model to the Invasion of Lebanon case study. Israel
initially complied with President Reagan's cease fire initiative until Israel constructed a perception
that benefits would accrue from engaging the perceived threat of the enemy. Israel believed that
while the cease fire was implemented the PLO were strengthening themselves while they, Israel,
was faltering (losses) under the cease fire restrictions. Israel evaluated two alternative choices, the
first choice was to continue compliance with the US cease fire initiative or alternatively, to disregard
the cease

How Much Is Milk Worth My Going At The Store?
Introduction Myriad decisions affront us every day. Each decision is decomposable into sub–
decisions. For instance, consider the mental turmoil or apathy required to determine whether you
shall go grocery shopping. First, you determine an initial need for grocery shopping (i.e., you are out
of milk, eggs, etc.). Next, you consider what you would rather (an evaluation of utility) do. This
cost–benefit analysis continues until going seems to bring greater utility or until staying does.
Though these calculations require a second or so in your mind, in decomposing this choice, one
finds a series of individual decisions contributing to the final. These subdecisions may "How much
is milk worth my going to the store?" or "How much does this television show dissuade me from
going to the store?" However, one can go deeper still. In answering each of the above subquestions,
you subconsciously evaluate the options on a scale of utility. Consider this concept, though: for any
arbitrarily selected value on that scale, you must subconsciously "decide" if the value is
satisfactory––a boolean decision (see Fig. 1). Additionally, all but the lowest layer of subdecisions
are considerable as independent decisions in different contexts. Accordingly, these decisions are
likewise decomposable to final boolean decisions, assuming all high level "decisions" are
decomposable. Also note these boolean decisions are never consciously considered in first order as
that requires additional levels of

Affordable Care Act: Article Analysis
This essay will be reviewing two articles talking about the Affordable Care Act. One article was
written and posted on The American Prospect(Citation) and the other was written and posted on The
American Spectator(Citation). This essay will explore the differing viewpoints and opinions of the
these online publications and how they affect the articles they post.
When someone writes an article, it is often done from a specific viewpoint(Book). A view point can
be described as a way of thinking and speaking about a specific topic (book). In politics, two
common view points are the Left and the Right (Book). The left is often associated with a liberal
minds set and the right is often associated with a conservative mindset (book 205). There ... Show
more content on Helpwriting.net ...
When the author writes about a potential negative, they does so in a positive light. This is akin to an
interview and the question about a failure is asked. A smart answer is to answer in a way that makes
the failure ends up being a positive. The articles notes that the program had a lot of issue during the
initial launch, with low enrolment numbers, but notes that it now covers millions of people (CITE).
The article likens the Affordable Care Act with other government programs like Social Security and
Medicare and how there has been multiple reforms with these programs (CITE). The article details
that the Affordable Care Act will also need reform to make it work, but that reform can make it
successful. At the same time that success is linked to a Democratic President winning the
nomination, as a Republican President will cause it to fail

Daniel Kahneman Research Paper
Daniel Kahneman is an Israeli–American Psychologist who is well known in his field of work.
Kahneman won the Noble Prize in Economics, and was an important contributor in the advancement
of the field of neuroscience. His work is only one small piece to his amazing and interesting story.
Daniel Kahneman was born in Tel Aviv, which is now Israel, on March 5, 1934. He would have been
born in Paris, but his mother was visiting family. His parents were Lithuanian Jews whom
immigrated to France in the early 1920's. At the age of seven young Kahneman drew his first graph
that showed his family's fortunes as a function of time that began to curve in the negative domain
around the 1940's. Around the age of eight, he broke the 6 p.m. curfew Jews ... Show more content
on Helpwriting.net ...
When he came to the United States, he was married to an Israeli woman named Irah. For a reason I
that I am not able to find, they sadly divorced. However, he found love again and this time made it
work, going on 38 years together. The woman he married was Anne Treisman, a British
Psychologist who also collaborated with her husband. Returning home after some time and taking
position as a lecturer in Psychology, he became a senior lecturer in five years. Kahneman also
continued his reaserach wrok, as he academically. Publishing his first work in the Journal 'Science'
as 'Pupil Diameter & Load on Memory'.
He then shifted from Behavioral Economics to Hedonic Psychology. Hedonic psychology, according
to Kahneman and co workers, "... is the study of what makes experiences and life pleasant or
unpleasant."
He also collaborated with several Psychologists, such as Thaler, Varey, Snell, and the best Amos
Tversky. Daniel Kahneman won the Nobel Prize in economics for his work on 'Prospect theory',
which he shared with Amos Tversky. The two were awarded the University of Louisville
Grawemeyr Award for Psychology. In the 2000's Kahneman was awarded seven different awards
and achievement, and the last one was the Presidential Medal of Freedom by the President, Barack

The Main Prospect Of Competition
(Checkland, P., Poulter, J. 2010). The methodology consists of a 7 stages which aids both in theory
and in the real world.
The Problem Situation
Ocado's main prospect of competition is going to be coming from its key partner being Waitrose,
'the planning of stepping up the marketing of their online presence' Waitrose is said to have been
done to compete with Ocado whom 'generate a large party of their revenue from the area'. Ocado
also faces challenges from Sainsbury's, Tesco, Morrison's and Marks & Spencer's, whom are all
growing their online presence. (Fletcher, N. 2011). Currently the UK online grocery market is
conquered by Tesco, Asda, Morrison's and Sainsbury's (Keynote, 2013).
(IGD, 2015) states that the 'UK grocery market is to ... Show more content on Helpwriting.net ...
The research shows the importance of Ocado's online presence and what they need to expand their
online operations. The introduction of its new stores and their hybrid facilities will make it hard on
them in terms of system management.
Comparison of Supermarket Models
'The UK grocery market is changing, with various channels which are needed to drive growth.
(IGD.COM 2014) states that the online sector, the discount sector and convenience sector are the
three channels needed to drive growth.
Tesco are currently leading in the market their like for like sales have increased by 0.7% in its core
UK business with a 1.3% growth for foo (Fedor, L. 2017). Tesco currently has many automated
hybrid facilities in terms of their operations management but their online presence is increased due
to them being UK's largest retailer with 'over 3, 500 stores and over 310,000 colleagues' (Tesco plc.
2017). Tesco's current business model focuses on four areas: Sell, Insight, Buy and Move. Their
strategy is to use the virtuous cycle and develop economies of scale across all of their business
functions, 'by doing the right thing for customers' (Tescoplc.com. 2017). This means they use a
centralized approach when it comes to its consumers as decisions are made at the top and integrated
throughout the business.
Sainsbury's current market share is 'maintained at 16.5%, which has increased their retail

The Implications Of Prospect Theory
The aspects that prospect theory takes into account and the expected utility doesn't, are emphasis on
low probability events and protective willingness, which means greater risk aversion for
precautionary decisions under risk (Kusev, P., van Schaik, P., Ayton, P., Dent, J. & Chater, N. 2009).
These are called heuristics and biases in decision making. In this part, other heuristics and biases of
framing of the problem, gambler's fallacy and overconfidence will be discussed in depth with
respective example and ACAR of its significance on process of making decisions. Firstly, the bias is
framing of the problem. When people frame the problem in different ways, it will result in different
decision. The example is observed when 'the description of options in terms of gains (positive
frame) rather than losses (negative frame) elicits systematically different choices' (Gonzalez, C.,
Dana, J., Koshino, H. & Just, M. 2005). This takes an important place in business decision making.
ACAR is made following. Frame (2012) outlines that framing is the first step when people make
decisions. Russo and Schoemaker (1989) proves that this bias affects the recognition and response to
problems by providing the 'boundaries (what will be considered part of the choice set), reference
points (elements used to determine success and failure), and yardsticks (how the outcomes are
measured)'. Nevertheless, different people can have different framing of the problem so if they
exchange thoughts, outcomes

The Prospect Theory, A Behavioral Economic Theory

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