New method reveals people's fear of loss, revolutionizing decision-making.
A new method has been developed to fully understand prospect theory, a theory about how people make decisions under uncertainty. This method allows us to measure how much people dislike losing compared to gaining, even when the outcome is unclear. By using this method in an experiment, researchers found that people are more averse to losing than gaining, and this aversion is consistent whether the situation is risky or ambiguous. The study also confirmed that people value gains less as they increase and losses more as they decrease, as predicted by prospect theory.