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A field that combines insights from psychology and economics to explain why people often make decisions that deviate from the predictions of standard rational-choice models.
Israeli-American psychologists who pioneered research on cognitive biases and prospect theory, fundamentally reshaping the field of behavioral economics.
A theory developed by Kahneman & Tversky (1979) stating that people evaluate outcomes relative to a reference point and are more sensitive to losses than to equivalent gains.
The value function is S-shaped: concave for gains (risk aversion) and convex for losses (risk seeking), and it is steeper for losses than for gains.
The baseline against which outcomes are judged as gains or losses; it is often the status quo or an expectation level, not an absolute wealth measure.