Prospect theory still holds ➥
If you had the following two choices:
- definitely gaining £3,000, or
- an 80% chance of gaining £4,000.
You'd choose option 1 and take the certain £3,000.
However, if you had a choice between:
- definitely losing £3,000, or
- an 80% chance of losing £4,000.
You'd do the opposite and take the 80% chance of losing £4,000.
Or at least that's what most people would do according to research.
This apparently demonstrates how we view losses in a different way to gains. It's all part of something called Prospect Theory and it won someone the Nobel Prize for a paper they published in 1979. Recent research shows it's still true.