Given the emphasis on the status quo by prospect theory, in international trade actors may find it easier to
A) agree on how to share the losses than on how to distribute the gains from trade.
B) come to a trade agreement in which both sides equally gain.
C) agree on how to distribute the benefits from a trade agreement than on how to share the losses.
D) walk away from a trade deal when it is clearly not in their favor.

Question

Given the emphasis on the status quo by prospect theory, in international trade actors may find it easier to
A) agree on how to share the losses than on how to distribute the gains from trade.
B) come to a trade agreement in which both sides equally gain.
C) agree on how to distribute the benefits from a trade agreement than on how to share the losses.
D) walk away from a trade deal when it is clearly not in their favor.

Quizplus · Accepted Answer

Prospect theory emphasizes that people tend to be more risk averse when it comes to gains and more risk-seeking when it comes to losses. Therefore, in international trade, actors may find it easier to agree on how to distribute the benefits from a trade agreement rather than how to share the losses.

Given the Emphasis on the Status Quo by Prospect Theory