The prospect theory contends that utility depends on deviations from moving reference points rather than absolute wealth.

Question

Quizplus · Accepted Answer

The statement correctly defines the core principle of prospect theory, which states that people evaluate gains and losses from a reference point and experience diminishing marginal utility for additional gains or losses. This means that the perceived value of a gain or loss depends on the individual's starting point or reference point rather than the absolute amount of wealth or money involved.

The Prospect Theory Contends That Utility Depends on Deviations from Moving