Question

According to Kahneman and Tversky (1984) subjective probabilities are not identical with objective probabilities. In the function they calculated to describe this relationship, which part of the curve is overweighted?

Answer 1

Answer:

Very low subjective probabilities

Explanation:

The prospect theory is an economics theory developed by Daniel Kahneman and Amos Tversky. It is used in a decision making process, a decision maker multiplies the value of each

outcome by its decision weight, just as expected utility maximizers multiply utility by subjective probability. In differentiating subjective probabilities with objective probabilities, the very low subjective probabilities are overweighted.