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Student’s Signature: Khanya Clark-Robinson

Khanya Clark-Robinson
Final Paper
Kahneman1, Daniel and Tversky, Amos. (1979). “Prospect Theory: An Analysis of Decision under Risk.”

1. Big Question
The big question of this article is how people make decisions under uncertainty of risks and rewards. Decisions under risks assume that a decision can be quantified as a positive or negative outcome with quantifiable probability. This theory was developed for monetary decisions and the process observations can be included in other fields; fields such as social sciences and policy making. 2. Background Information
The standard for analyzing decisions was the theory that quantified the outcome and probability. A reasonable individual will choose the option with the best utility. The probability results should all add up to 100%.
The utility theory has a defined logical foundation and it represents a behavior with uncertainty and a variety of decisions. At this time it is the approved method that evaluated decisions in science. Although it is utilized in science it lacks the human psychology that enables real life decisions. 3. Limitations of previous work.
The expected utility theory fails in certain types of situations. An example would be insurance companies that utilize the expected utility theory. The profits are generated comes from consumers who make their decisions and they have to