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Does prospect theory warrant a paradigm shift in the economics of risk?
South African Journal of Economic and Management Sciences
This paper assesses whether a paradigm shift should be made from expected utility framework to prospect theory framework – in the economics of choice under risk. A brief overview of the subject is outlined, starting with expected utility theory and noting its descriptive limitations. Proposed theories to make up for these limitations is also provided. Prospect theory emerged as the most serious challenger to expected utility theory. A review of some descriptive predictions of prospect theory,doi:10.4102/sajems.v9i2.1149 fatcat:kvryuwqebbhxhdm75rd2ygptue