Theory 48: Prospect theory

Number of Constructs: 19
Number of Triples: 23

Theory triples

• Prospect transitions to Edited prospects
• Certainty effect influences Decision weights
• Edited prospects influences Decision weights
• Edited prospects influences Subjective values
• Editing phase influences the 'Prospect' to 'Edited prospects' Transitions to relationship
• Coding type of Edited prospects
• Gains type of Edited prospects
• Losses type of Edited prospects
• Reference point influences (*) Coding
• Prospect influences (*) Coding
• Segregation part of Editing phase
• Certainty effect part of Editing phase
• Isolation effect part of Editing phase
• Detection of dominance part of Editing phase
• Simplification part of Editing phase
• Cancellation part of Editing phase
• Coding part of Editing phase
• Combination part of Editing phase
• Possibility effect part of Editing phase
• Decision weights influences (*) Choice / behaviour
• Subjective values influences (*) Choice / behaviour
• Decision weights part of Evaluation phase
• Subjective values part of Evaluation phase

Theory constructs and annotations

• Prospect Contracts that yield certain outcomes with certain probabilities
• Edited prospects The prospects left to choose from after the editing phase
• Certainty effect The tendency to overweight outcomes considered to be certain compared to outcomes that are presented as probabilistic [ BCIO:050849 (Certainty bias) 48 ]
• Decision weights The impact of the probability on the total value of a prospect assigned [ BCIO:006024 (Belief about likelihood of consequences of behaviour) 48 74 55 77 ]
• Subjective values The extent to which one perceives an outcome as valuable; may be strictly positive, strictly negative or neither [ BCIO:006038 (Evaluative belief) 48 46 39 50 42 31 ]
• Editing phase Stage at which a preliminary analysis of available prospects is conducted, and options are organised and reformulated
• Coding The process through which outcomes are sorted into gains or losses
• Gains Positive increases from the reference point
• Losses Negative decreases from the reference point
• Reference point One's current level of assets
• Segregation A process by which the riskless component is separated from the risky component [ BCIO:006115 (Heuristic process) 48 50 ]
• Isolation effect The tendency to ignore the shared characteristics of presented alternatives and focus on the differences between them in order to simplify choices. [ BCIO:006115 (Heuristic process) 48 50 ]
• Detection of dominance A process of editing information to assess for any superior prospects and disregarding those that are inferior [ BCIO:006115 (Heuristic process) 48 50 ]
• Simplification A process of simplifying prospects by rounding probabilities and or outcomes, or by disregarding extremely unlikely outcomes [ BCIO:006115 (Heuristic process) 48 50 ]
• Cancellation A process of information editing that disregards shared components of alternative prospects in order to simplify decision-making. [ BCIO:006111 (Decision simplification) 48 , BCIO:006115 (Heuristic process) 48 50 ]
• Combination A process of simplifying prospects by combining the probabilities of identical outcomes, and evaluating them in this combined form [ BCIO:006115 (Heuristic process) 48 50 ]
• Possibility effect The degree to which an outcome is likely to occur
• Choice / behaviour The selection of one prospect over another or others [ BCIO:006047 (Decision) 48 39 ]
• Evaluation phase A second stage of prospect evaluation where edited prospects are assessed and the prospect with the greatest value is chosen. [ MFOEM:000002 (Appraisal process) 48 ]

Theory illustration

Theory Reference

• Kahneman, D & Tversky, A. (1979). Prospect theory. An analysis of decision under risk. Econometrica, 47(2), 263-292.