Prospect theory

[gtamfreak]

It is stated that quantitative elements of prospect theory resembles the expected utlity theory except for these differneces- 1) Values are attached to changes rather than the final states 2) decisions weights need not coincide with the probability. I don’t understand the second point here. Can somebody please explain? Thanks.

 

[S2000magician]

gtamfreak wrote: It is stated that quantitative elements of prospect theory resembles the expected utlity theory except for these differneces- 1) Values are attached to changes rather than the final states 2) decisions weights need not coincide with the probability. I don’t understand the second point here. Can somebody please explain?

The objective probabilities are 60% green, 40% red.
Your subjective weights are 80% green, 20% red. (“Sixty-forty? I ain’t buyin’ it.”)

gtamfreak wrote: Thanks.

My pleasure.