Question

In kahneman and tversky's prospect theory, they hypothesized that people tend to _____ low-probability outcomes and _____ high-probability outcomes.

Answer 1

People tend to overweight low-probability outcomes and underweight high-probability outcomes.

Answer 2

Overweight low probability outcomes

UNderweight High probability outcomes.

Explanation:

Amos Tversky and Daniel Kahneman proposed the prospect theory that aimed to explain and understand the behavior of individuals, giving them a sample of choices to take, when put in front to the different decisions that had to be made, people often valued chances that were 99% probable to happen with a 95 to 85% chance, meaning that the didn´t give enough credit to the number and probabilities, and when facing risks of 1% probability of happening, they outweigh them with a 5 to 15 %.