Which of the following is an implication of the prospect theory?
A)Decision makers tend to gravitate toward the "status quo."
B)Decision makers are utility maximizers.
C)Decision makers are inherently irrational.
D)Decision makers are not constrained by global factors.

Question

Quizplus · Accepted Answer

Prospect theory, developed by Daniel Kahneman and Amos Tversky, suggests that people value gains and losses differently, leading to decisions that deviate from those predicted by classical utility theory. One implication of this theory is that individuals have a strong tendency to remain at the status quo because the potential losses from leaving it loom larger than the potential gains. This is why choice A is correct. Choices B, C, and D do not directly follow from prospect theory. While prospect theory does challenge the assumption of utility maximization (B) by suggesting people evaluate potential losses and gains differently, it does not claim decision makers are inherently irrational (C) or not influenced by global factors (D).

Which of the Following Is an Implication of the Prospect