Friedman-Savage Versus Prospect Theory

[rellison]

1) Friedman-Savage says a person has a risk-seeking (convex) utility function for gains and a risk-averse (concave) utility function for losses.
2) Prospect Theory says that people are risk averse when facing gains but loss averse when facing losses.
Is this accurate? They are very similar.

 

[cohiba42]

edit 2) risk averse when gains, but risk-seeking when facing losses.

 

[rellison]

I see so they are mirror images of each other. Thanks.

 

[Hard Dollars]

rellison wrote:
2) Prospect Theory says that people are risk averse when facing gains but loss averse when facing losses.

AKA loss aversion (quick to realize gains but hold onto losses)