Prospect theory was developed by Kahneman and Tversky (1979) because experimental evidence says that people often behave contrary to expected utility theory.
1. What are the main differences between prospect theory and utility theory?
2. Under which circumstances are people risk averse and under which circumstances are people risk seekers according to utility theory?
3. Under which circumstances are people risk averse and under which circumstances are people risk seekers according to prospect theory?