Risk Prospect Theory.
Prospect theory makes assumptions about the shape ofthe value function V(X).
Loss aversion: the consumer's valuation of an outcome is more sensitive to small losses than to smallgains.
Diminishing sensitivity: the marginal impact of enlarging a change from the status quo declines with the size of the change.
----Strategy Game Theory Shortcoming.
Game theory tends to predict behavior most accurately once players have gained some experience with a game, particularly if the rules are relatively simple.
However, even experienced players of simple games sometimes make decisions that seem contrary to their own interests