🧠 Cognitive Bias
Prospect Theory (Kahneman & Tversky)
People are loss averse - losses loom larger than equivalent gains. We tend to be risk-seeking to avoid losses but risk-averse when facing gains. This bias affects everything from policy design to personal financial decisions.
People are loss averse - losses loom larger than equivalent gains. We tend to be risk-seeking to avoid losses but risk-averse when facing gains. This bias affects everything from policy design to personal financial decisions.
💡 Development Context
Loss aversion explains why farmers resist adopting new crop varieties (fear of losing current yield) and why cash transfer programs work better than subsidies.
🎯 Experimental Scenario
You are advising the Karnataka government on drought relief policy. The state has ₹500 crores allocated. Choose between two relief strategies based on their expected outcomes.
Make your choice to see the behavioral analysis...
Experiment 1 of 5 - Prospect Theory
📊 Behavioral Patterns
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Experiments Done
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Biases Detected
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Rational Choices
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Bias Strength
📚 Nobel Prize Insight
Kahneman & Tversky's prospect theory revolutionized economics by showing that people don't make decisions rationally. We systematically deviate from expected utility theory in predictable ways.